As of today (13 January 2018) UK firms will no-longer be able to pass on the cost of processing card payments.
Companies have been restricted to fees based on ‘cost-recovery’ only since 2013, but the changes coming into force in January 2018 see a total ban on credit-card fees.
Faced with the impending letting fee ban, this could be seen as another nail in the letting agents’ coffin.
What does this mean for letting agents?
Well, it means you need to cover all of the costs of processing card payments. Typically this will mean a monthly service charge (depending on the number of payments you process), PCI compliance fees, transaction authorisation fees, merchant service charges, and probably chip and pin terminal hire.
Until now it has been possible to charge a fee based on a small percentage of the payments made to recover the cost of offering convenient payment options. However, this is no longer the case.
So, what can letting agents do now?
The simplest way to comply is simply not to charge fees. Of course doesn’t help cover the legitimate cost of processing transactions.
Letting agents facing squeezed margins can still charge administration, or service fees; providing that they are not specifically related to credit or debit card transactions.
Likewise, general fees and commissions may simply be increased to cover rising operating costs. Of course, this depends on your customers’ ability (and willingness) to absorb higher prices.
One interesting point, perhaps loophole, to consider is that the ban is a consumer protection measure – meaning that it only applies to consumers. If your client landlords are registered companies, with company bank/credit cards then the rules do not apply and fees may still be levied. Letting agents will have to be careful though, as even if the landlord is a ‘business’ if he or she is using a personal card – you will be breaking the law if you charge a fee.
Of course it is up to each business to work out the value to their business of multiple fee tariffs – and how their customers may react.