Visa's bank deal leaves shoppers out of pocket, says watchdog

Visa's bank deal leaves shoppers out of pocket, says watchdog

The Office of Fair Trading said yesterday it believed UK shoppers are being overcharged because of an "anti-competitive" agreement between credit card organisation Visa and the major banks.

The OFT indicated it was likely to rule that banks have been charging retailers excessively high fees. Last month, in an almost identical case, it issued a ruling against Visa's rival, Mastercard.

This new row concerns an agreement between Visa and Britain's banks relating to the fees charged when consumers use their credit cards to buy goods. When a credit card is used, a percentage of the purchase price is paid by the retailer, via its bank, to the card company. It is this "multilateral interchange fee" that is at the heart of the dispute. While these costs are borne initially by retailers' banks, they are passed on to the retailers and in turn to the public through higher prices.

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The OFT began investigating the Visa agreement last year, and yesterday issued a "statement of objections". The watchdog said it believed the agreement led to an "unduly high fee" being paid to card issuing banks by retailers' banks. "The cost of these fees is passed on to retailers and ultimately to consumers," it said.

An OFT spokeswoman said the statement was "an indication of what our thinking is, not a final decision".

Colin Grannell, Visa UK managing director, said it did not believe its interchange fees were unduly high, adding: "Visa UK adopted the principles cleared by the European Commission to set interchange [fees] three years ago."

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