Q1: What data does HM Treasury have on the volume of purchases currently made by consumers using a UK-issued card from an EEA-based merchant acquirer? What estimate has HMT made of the possible additional costs that would result to consumers using a UK-issued card?
A1: You requested further data on the value of card transactions currently made between UK card issuers and EEA merchant acquirers, and potential estimates of the costs that consumers might face as a result of this SI. Data on card transactions is not routinely held by HM Treasury. The Payment Service Regulator collects sensitive data from card issuers for compliance purposes. This data includes the value of transactions where the issuers and point of sale are based in the UK but the acquirer is in an EEA territory that is not the UK (a cross border transaction as defined in Article 2(8) IFR), but is not available at the aggregate level. In the past, the interchange fee has been higher than the current caps for debit and credit cards. The potential impacts on consumers as a result of interchange fee caps not applying to cross border transactions, in the unlikely event of leaving the EU in a no-deal scenario, would be both indirect and result from the commercial decisions of businesses to adjust interchange fees.
Q2: At 12.4 of the EM, you say that a full Impact Assessment will be published when an opinion from the Regulatory Policy Committee has been received. You may know that, in debates in this House, members have criticised the absence of Impact Assessments from HMT statutory instruments being debated. At 12.2, you also say: “Businesses [and presumably consumers] may face more significant costs as a result of the scope of the regulations reducing to UK-only, but this is a function of the UK leaving the EU, as opposed to the onshoring approach taken in this instrument [words in square brackets added].” Neither the committee nor the House may agree with the view that any costs resulting specifically from the changes proposed in these Regulations were in fact generally attributable to Brexit.
A2: You asked about the impacts on businesses and consumers as a result of the scope of the regulation reducing to the UK only. The most significant effect of this reduction in scope is that the interchange fee caps on transactions between EEA and UK payment service providers would no longer apply, any decision to adjust interchange fees thereafter would be commercial decisions. We deem that any impacts resulting from this would be as a result of EU Exit, rather than as a result of the SI. We outline our reasoning below.
In the unlikely event of no deal, the UK would automatically be outside the scope of the EU Interchange Fee Regulation. Therefore EEA card issuers would be permitted to charge higher interchange fees to UK acquirers, as the caps set in the EU IFR would no longer apply to UK-EEA card transactions.
It is technically possible that in the IFR SI the UK could mandate interchange fee caps that apply to the interchange fees that UK card issuers would be permitted to charge to international transactions. However, this would place asymmetrical obligations on UK businesses vis-à-vis third countries, whereas the current situation provides symmetry with EEA countries. Our default onshoring approach to fixing deficiencies relating to the scope, is to reduce the scope of the regulations to UK-only, rather than extending the scope worldwide.
28 November 2018