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The Credit Services Association (CSA)
CSA urges collections agencies to prepare for new card payment ban
From 13 January next year, businesses, including CSA members, will no longer be able to charge surcharges for certain card transactions, but will still face the costs for processing card payments.
John Ricketts, President of the CSA, says this could have ‘serious implications’ for debt collection agencies managing card payments for outstanding debts, and they need to be prepared: “Members need to act now to ensure their websites and letter suites are updated or they will be breaking the law,” he explains.
“Although a simple enough initiative on the outside, it may involve significant changes to IT processes and call processes, all of which will need to be in place before the January deadline.”
Mr Ricketts is also concerned that the plans will add yet another layer of cost that will ultimately have to be met elsewhere.
“While Her Majesty’s Treasury has stated it will engage with businesses regarding whether more can be done to help them with these charges, and the government has previously capped the costs businesses face for processing card payments, further costs appear unavoidable,” he says.
“While the transaction charges may appear small to the outside world, they can represent a large percentage of the total commission for the work undertaken, especially when only nominal payments have been agreed. Multiply these charges by the many thousands of accounts an agency may handle, however, and it can add up to a significant sum of money.”
As part of the Government’s new Payment Services Regulations 2017 (PSR 2017), alternatives to card payments are being more actively promoted. Where the customer gives their explicit consent, authorised third parties, including financial technology firms, will be able to access data from all of the customer’s bank accounts in order to provide information services and make payments on behalf of customers. (This is all part of the ‘Open Banking’ initiative prompted by the Competition and Markets Authority’s investigation into the retail banking market.*)
“The intention is that a range of alternative payment options may be available to consumers,” John continues. “This may enable innovations such as managing all bank accounts from one app or making automatic payments between bank accounts when funds are running low to avoid overdrafts.”
In the longer term, John believes this will be of benefit to creditors and customers alike, but in the short term, prohibiting the charging of fees will make a difficult job more difficult still: “For agencies who are used to passing on these costs, this will no longer be an option,” he concludes.