Five prepaid credit card companies have been fined by the UK's payments watchdog for breaking competition rules.
Mastercard, allpay, Advanced Payment Solutions (APS), Prepaid Financial Services (PFS) and Sulion have been pulled up by The Payment Systems Regulator (PSR) after an investigation found they all breached competition laws by agreeing not to compete or poach each other’s customers in the prepaid cards market.
Between 2012 and 2018, Mastercard, along with Allpay, PFS, Sulion and APS, ran schemes to distribute welfare payments for local authorities.
The schemes were designed to help local authorities provide pre-paid cards for vulnerable people such as asylum seekers, the homeless and victims of domestic violence.
But the Payment Systems Regulator found for six years, the firms agreed not to compete with each other when bidding for local authority contracts.
The investigation was opened in October 2017 following a complaint made by allpay about one of the infringements.
In February 2018, the PSR carried out unannounced searches at the premises of some of the parties. In March 2021, all parties settled and admitted breaking the law.
In its decision, the PSR found there were two market sharing cartels in the prepaid cards market in violation of the Competition Act 1998.
The first cartel involved all five parties and lasted from 2012 to 2018.
The second cartel involved APS and PFS and lasted two years between 2014 and 2016.
During this period, the five firms agreed not to target or poach each other’s public sector customers that were either already in contract with another company or were being provided services through a pilot programme elsewhere.
The second cartel involved a separate arrangement between APS and PFS not to target each other’s public sector customers when a contract was up for renewal, including through a public tender.
In its infringement decision issued today, the PSR has imposed fines totalling more than £33million for each party’s participation in the illegal conduct.
The fines for each company include: Mastercard: £31,560,062; PFS: £916,746; allpay: £28,553; APS: £755,419 and Sulion: £572.
Chris Hemsley, managing director of the Payment Systems Regulator, said: “This investigation and the significant fines we have imposed send a clear message that the PSR has zero tolerance for cartel behaviour.
"We will intervene and enforce the law strictly to ensure there is effective competition in payments markets. This case is particularly serious because the illegal cartel behaviour meant there was less competition and choice for local authorities. This means they may have missed out on cheaper or better-quality products which were used by some of the most vulnerable in society.”
A Mastercard statement said: “Mastercard is committed to upholding all regulatory and legal standards and we apologise that the actions of two former employees resulted in the standards expected of us not being met in this instance.
"We have taken this issue very seriously and have put further controls and training in place to ensure it cannot occur again, while working with the PSR to settle this matter at the earliest possible opportunity.”