The Alliance of Lithuanian Consumer Organizations warns us that regulation of the payment card interchange fee that is planned to be imposed in the European Union (EU) would mean higher taxes for Lithuanian consumers and, it is possible that an end consumer will be the victim in the struggle against the bank charges.

It was decided to take regulation at the EU level because of the large European merchants' intention to determine the binding fee limits which would allow them to save while accepting the payment cards and executing the settlement operations thereby.

The interchange fee, i.e. a certain percentage of the payment card transaction, is paid by the merchant's bank to a cardholder's bank. This fee is intended to balance differences between electronic payment costs and ensure that each participant of the transaction will pay a fair portion of the expenses related with processing and security of the payment card transaction. This fee is included into the fee which the merchant has to pay to his bank.

'We would welcome any initiative which might result in benefit to the consumer, but in this case we see very different intentions. It is not by chance that major European merchants' associated organisations are actively pursuing the fee limiting. Unaccountably, it is thought that the regulation will also benefit to consumers, because after the reduction in the fee burden for merchants the price of the goods sold by them will purportedly decrease. Unfortunately, the regulation in no event would reduce maintenance costs of the payment system; there is merely an intention to divide them otherwise. Experience and economic theory say that in such cases a consumer is always the final payer,' said Mrs. Eglė Kybartienė, the President of the Alliance of Lithuanian Consumer Organizations.

On Monday the Alliance of Lithuanian Consumer Organizations has discussed these regulatory issues at the meeting with experts from Spain who visited in Vilnius, Prof. Pascual Fernández and Mr. Manuel Delgado. Spain is one of the countries with experience in assessing the consequences of the interchange fee regulation: from 2006 to 2010 the interchange fees have been reduced by more than 57 percent in this country.

The merchants have saved, while the consumers have lost

After completion of the investigation the economists from two Spanish universities, UNED and Rey Juan Carlos University in Madrid, found out how such reduction affected the Spanish market: it brought no benefit to the consumers in the country, but the law was beneficial for merchants who saved nearly EUR 2.75 billion (LTL 9.5 billion) during five years. These savings did not help to reduce prices of the goods: the merchants simply increased their profit margin. Meanwhile, over the same period the consumer expenses to acquire and maintain payment cards grew by 50 per cent and an additional burden amounting to EUR 2.35 billion (LTL 8.1 billion) was imposed on the consumers' shoulders.

It is not surprising that now the Spanish consumer organizations (such as the authoritative Spanish Association of Financial Services Consumers ADICAE functioning for more than a quarter of the century) are also speaking actively against bureaucratic imposition of the interchange fee procedure.

According to Kęstutis Kupšys, who attended the meeting as the Executive Director of the Association 'For Honesty in Banking', belonging to the Alliance, it is most likely that the idea of the the interchange fee regulation in the EU has appeared upon inspiration of the success of the telecommunication market regulation. 'The prices for consumers have decreased, so it is expected that the same model will also be effective in the card fee regulation. However, it is forgotten the fact that this case is quite different: here it is talking not about regulation of the service selling price, but about allocation of the system support costs between the market participants. One of the participants wishes to transfer his costs to other market participants, instead, of seeking the ways to reduce these costs for all,' he said.

The concurrent opinion has also been expressed by Rūtenis Paukštė, the General Director of the Lithuanian Association of Bank Customers: 'In regard to this issue Lithuania does not grant enough attention for the processes taking place in the EU. We should not succumb to the pressure from major European merchants and support actions that could change the balance on the market to the direction unfavourable for the consumer.

About the Alliance of Lithuanian Consumer Organizations

The Alliance of Lithuanian Consumer Organizations is a confederation of seven consumer organizations, which includes, listed in alphabetical order in the Lithuanian language, the Association 'For Honesty in Banking', the Lithuanian Association of Bank Customers, Lithuanian Citizens Advice Union, the Lithuanian Consumer Association, the Lithuanian Consumer Union, the National Association of Financial Services Consumers, and the Consumer Rights Protection Centre. Eglė Kybartienė, the President of the National Association of Financial Services Consumers and a member of the European Consumer Consultative Group (ECCG), has become the President of the Alliance.