A forthcoming decision by the House of Lords could seriously dent confidence in cross-border e-commerce. The Lords have been hearing arguments in the case this week. The Consumer Credit Act allows shoppers to claim refunds from credit card issuers if they encounter problems with goods purchased using a card. Section 75 of that …
Most interesting , given the simple fact that Credit Card Providers losses to bad lending out weigh frauds by a very massive margin .
To offset these losses , they have combined three methods of recovery in the form of interest on the outstanding balance then charge card issue and maintenance fees and finally on the merchant side is the basic merchant fee levy which can range from a low of .75% to 5% or an approximate average of 3% , plus other charges or an outright rejection of the application to be a merchant !
As with all businesses they are not a charity and normally run a full recovery of all operational costs at all times !
The other aspect of the merchants contract is the payment is in a form of controlled escrow and the Banks reserve the right to recall the funds within the grace periods as defined by the International Co-operative Card Brands who maintain the required international transaction clearing interface to provide world wide transactions . However the issuing Banks within the scheme remain responsible for the outstanding debts incurred by card user and can levy assorted control fees and charges !
The customer of course literally pays three ways to support the bad debts and fraudsters ,and the cash paying customer effectively ends up subsidizing credit card users most of the time unless the fairer merchant specifies fee extra for card users !
As to why they want to change the playing field can be put down to total greed , and can only be more thicker icing on the cake and another way to milk the paying customer of even more money then before !
It would be good to understand what similar protection our other EU colleagues have.
I think the UK should propose an EU wide compenstation scheme, the credit-card companies can afford it and it would mean that an internet transaction within the EU would be treated the same no matter where the credit card was issued.
The argument against would be that UK company law means that the risk is low whereas in some EU states the risk might be great and UK card issuers will not want to be exposed to the risk in these EU countries (if indeed this is the case). Hence, it would be good to have some statistics...
As heystoopid says, Card Issuing Companies are quite happy to take big chunks of money from customers, but don't forget that they also charge merchants for the "privilege" of using their system (some as much as 3.5% on each transaction!)
There is also the fact that if a card is used fradulently and subsequenly a charge-back is actioned (even when the transaction was correctly authorised), the merchant loses out twice, because they have to pay back the money they took for the transaction *and* they've lost the value of the goods.
This of course ties in with the recent law change...
...which means if you feel your card is being used in an illegal way (id theft, for starters) you cannot report it to the police, you have to report it to the card company who will investigate it, and report it to the police if they feel it is needed.
"the merchant loses out"
"if a card is used fradulently ... the merchant loses out"
Surely at the end of the day it's only ever Honest Joe Public that ends up paying, whatever the intermediate details might be; the merchant just accounts for fraud/shrinkage/etc by raising prices to compensate? (Admittedly that's probably a bit tricky when all prices are required to end in 9.99 like they apparently are in the UK...)
Small business perspective
Very small businesses get charged percentages around 5.5% in Australia.
"the merchant just accounts for fraud/shrinkage/etc by raising prices to compensate?" assumes competitive forces give them the freedom to do so.