Is it illegal to levy extra charges for payments made by credit card? I was paying for something the other day and didn't have any cash on me. But when I said I would pay by credit card, the merchant said there would be a surcharge. Is that allowed? KN, Dubai
Expert 1: Ambareen Musa, founder and chief executive of Souqalmal.com
This is a common complaint voiced by many consumers in the UAE. While various regulatory agencies have cracked down on commercial establishments charging additional fees on credit card transactions, a definitive law banning all such establishments from doing so is yet to be introduced. Some retailers are still charging an extra fee on credit card transactions, thereby forcing customers to pay in cash to avoid the additional cost.
Current regulations in the UAE authorise banks to levy an additional charge on merchants for both credit and debit card transactions. This is subject to a maximum fee of 2 per cent of the value of goods and services sold. The Ministry of Economy and its Higher Committee for Consumer Protection has been working towards prohibiting merchants from passing on this fee to the cardholder.
The first phase of cancellation of credit card fees is already complete. The ban, which was implemented in January 2016, effectively prohibited additional credit card fees in the education, health and aviation sectors. Consumers can now pay for healthcare facilities, fees at educational institutions, airline tickets and travel packages with no additional charge when using credit cards.
According to recent reports, the Ministry of Economy has already started working on a second phase, and is considering banning additional fees for all credit card services and transactions in other sectors as well.
Other regulatory efforts to curb this practice are also under way. A recently issued circular by the Abu Dhabi Department of Economic Development (DED) warned all trade licence holders in Abu Dhabi against charging any surplus fees if customers make a payment using credit cards. Customers are being encouraged to report any violations, by calling DED’s toll free number, 800555.
Service providers can be penalised with a fine of up to Dh100,000 if found in breach of the directive.
Expert 2: Mohanish Agni, head of merchant sales and solutions at Visa Middle East and North Africa
Several government departments in the UAE have stated that it is illegal for merchants to apply a surcharge for using a credit card to purchase goods and services, including the economic development departments in Dubai and Abu Dhabi, the federal Ministry of Economy, the Dubai Consumer Protection Department, and the Supreme Committee for Consumer Protection (SCCP).
The Dubai Consumer Protection Division said in a guidance on the subject, that “when purchasing products, consumers should be given the same price irrespective of paying by cash or credit card”. Yet some retailers and merchants still apply a charge for using credit cards, which in some emirates can have consequences.
In July this year, the Abu Dhabi DED issued a circular to merchant traders, warning of the consequences of applying charges illegally. Businesses in Abu Dhabi that charge an extra fee on credit card transactions will now be fined up to Dh100,000.
Other emirates have repeatedly warned merchants that legal action will be enforced for such violations. Visa has been working closely with banks and companies in the UAE to stop the practice of surcharging on credit cards as it believes that customers should be free to choose how they pay and is against the application of any fee or surcharge that differentiates between forms of payment as this inhibits a customer’s choice. If cardholders would like further information or advice, they should speak to the consumer protection or consumer rights department in their emirate.
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