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File photo dated 20/1/2010 of a Ryanair plane lands at Dublin Airport. Budget airline Ryanair raised its annual profit predictions today after a sharp fall in fuel costs helped it narrow its quarterly losses. PRESS ASSOCIATION Photo. Issue date: Monday February 1 2010. Ryanair reported a shortfall of 11 million euros (Â£9.6 million) in the three months to December 31, from 102 million euros (Â£88.8 million) in the same period a year earlier. See PA story CITY Ryanair. Photo credit should read: Julien Behal/P
Adam Aiken, Editor
Monday, July 4, 2011
The pressure on budget airlines to stop imposing “last-minute” fees on consumers simply for the privilege of paying by card has grown with a call by the Office of Fair Trading for an end to the practice.
The controversial set-up has long been criticised by consumer groups, and now the OFT has joined the clamour for change.
Following a so-called “super-complaint” from consumer group Which?, the OFT has threatened airlines and other travel companies with legal action if they persist with their current behaviour.
People who make online bookings often find that huge charges for paying by credit or debit card are added to the cost of the transaction – but only at the final stage of the process.
This is known as “drip-pricing”, with consumers often opting to accept these charges instead of going through the hassle of abandoning the whole process and starting all over again elsewhere.
Another criticism is that the charges – which are usually completely disproportionate to a retailer’s cost of processing a payment – are in effect unavoidable, so should not be treated as optional extras at the end of the process.
The OFT has now said that surcharges for using credit or debit cards are potentially misleading when they come as a “surprise” to customers.
However, Ryanair – often considered the most bullish of the budget airlines that use the practice – said the OFT’s findings would not impact the way it ran its business. The Irish no-frills operator said it did not “impose” any debit or credit card transaction fees, and it argued that because it did not charge people for using a Mastercard Prepaid, the payment of fees was technically an optional extra.
“Ryanair is one of the only airlines to provide access to fees information directly from its home page, where it is clearly explained that Ryanair’s avoidable administration fee may be charged to defray the substantial costs associated with our booking system,” the airline said in response to the OFT report.
The OFT refused to name and shame the worst offenders but it did point out that Easyjet charged £8 per debit or credit card transaction, and only after customers had navigated their way through eight web pages.
Ryanair adds £6 per journey after four pages, and Trainline adds £3.50 for a credit card transaction after seven pages.
Peter Vicary-Smith, chief executive of Which?, said: “Thousands of people have told us that hidden or excessive card fees are unfair, and we’re delighted that the OFT supports this view – it’s a victory for consumers. We want to see the measures recommended by the OFT put in place as quickly as possible and finally put an end to the practice of card surcharging.
“While we understand that some of the regulatory changes will take some time, we urge the OFT to take steps immediately to ensure that consumers know the true cost of their purchases up front.”
Melanie Johnson, chairman of the UK Cards Association, said: “We are delighted that the OFT has sent out a very clear warning to companies who have been misleading customers with excessive surcharges for using their cards.
“They should not generate profit by imposing inflated surcharges when their actual card processing costs are substantially lower.
“There are costs to every business for accepting payments but the vast majority don’t charge us for paying in different ways. Why would a business choose to charge customers more for choosing the card they most want to use?”
However, despite the widespread welcome for the OFT ruling, budget airline customers can expect the likes of Ryanair to fight tooth and nail to maintain the status quo.