Airlines risk legal action over credit card 'sting'

Budget airlines, theatres and football clubs risk legal action if they continue to levy inflated charges for paying by credit and debit cards, the Office of Fair Trading (OFT) warned yesterday.

In a long-awaited crackdown on "rip-off fees", the business watchdog said entertainment and travel firms should drop debit-card charges and levy proportionate ones for credit cards.

Passengers booking with budget airline can be stung by fees approaching £50 to cover processing costs which come to a fraction of that amount. Although many firms now waive debitcard charges, some airlines and ferries charge £5 per transaction when the processing cost is as little as 20p.

The OFT launched its 90-day investigation after the consumer group Which? lodged a super-complaint claiming that the charges were unfairly penalising consumers and hindering competition by making it difficult to shop around online.

The OFT concentrated on investigating the travel sector – airline, ferry and train companies – but said its conclusions applied to all credit and debit charges made by businesses. It complained that the airline sector, which charged £300m payment fees last year, often added charges only at the end of a drawn-out booking process. The watchdog refused to name and shame the worst offenders, but pointed out that customers passed through eight web pages before easyJet added an £8 charge, while Ryanair levied £6 per journey only after four pages.

Cavendish Elithorn, senior director of the OFT's consumer group, said: "Consumers find it harder to shop around and find the best deal if they have to invest time and effort in discovering surcharges. We will take enforcement action against any businesses that do not respond to today's announcement and instead continue to use misleading surcharging practices."

The OFT's chief executive John Fingleton criticised Ryanair's booking fee as "puerile" and "almost childish" in a front-page interview in The Independent last year. Ryanair last night attacked the watchdog, insisting that customers could avoid its "administration fee" if they used MasterCard Pre-pay. The OFT said that because so few people held such cards such charges were "effectively compulsory".

The OFT does not have the power to order firms to change their practices but can take court action under the 2008 Consumer Protection from Unfair Trading Regulations. It will also ask ministers to outlaw unfair charges.

Responding to its findings, Peter Vicary-Smith, Which?'s chief executive, said: "We want to see the measures recommended by the OFT put in place as quickly as possible and finally put an end to the practice of card surcharging. Industry shouldn't drag its feet over this."

Martin Lewis, creator of Moneysavingexpert.com, said the announcement was "only the beginning of the end" of excessive charges. Calling for a law requiring the core price advertised online to include debit-card charges, he said: "The current system of budget airline surcharges for both debit and credit cards is a scam."

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