Compulsory fee warning issued to PayPal users in the UK

By Rachel Pugh & Emma Munbodh

A warning has been issued to British PayPal users.

The payment provider says it will hike fees for payments between businesses in the UK and those in Europe, from November.

British businesses will be charged a 1.29% fee for payments from the European Economic Area and vice versa, PayPal said.

Most currently pay about 0.5% in similar charges, which have remained unchanged since before the UK left the EU customs union and single market.

While the bill will be at the burden of retailers, it's likely that struggling businesses could push up prices to help meet the increased cost of sending items abroad.

Visa and Mastercard both announced plans to increase interchange fees on purchases made by UK-based customers from most of Europe earlier this year.

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These interchange fees were capped in 2015 over concerns that hidden costs were leading to excessive charges for both companies and consumers.

It charges were locked at 0.2% and 0.3%, however these rules no longer apply because of Brexit, reports the Mirror.

The move will affect online transactions with EU-based companies in sectors such as online retail, hospitality and travel.

Interchange payments are levied on behalf of banks each time a payment is made, with the money then passed on to the card-issuing bank.

In March, Visa said EU-based businesses would be asked to pay 1.5% more fees when UK consumers order an item from abroad.

And from October 15, Mastercard will charge a 1.5% fee for every online credit card payment from the UK to the EU, up from 0.3% at the moment.

Earlier this year, Kevin Hollinrake, chair of the all-party parliamentary group on Fair Business Banking, called for regulators to introduce a new cap.

"This smacks of opportunism and I would urge the regulators to step in as a matter of urgency to ensure that financial institutions do not use Brexit as an opportunity to hike up costs that consumers will ultimately bear," he said.

Adam French, Which? consumer rights expert, added: "Consumers are already facing significant inconvenience and extra costs when shopping with businesses based in the EU and Mastercard's decision to reimpose these hefty charges will come as another blow.

"The success of Brexit will be judged by how it affects our everyday lives, so the government must not neglect these consumer issues. Ministers must do a better job of explaining a confusing array of new rules and regulations and the government needs to work with the EU with a view to removing these costs as part of future negotiations."


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