Cap on credit card fees

European lawmakers on Tuesday voted in favor of a proposed cap on debit and credit card transaction fees, hoping to put and end to a battle with payment groups such as Visa Europe and MasterCard and scale back a multi-billion-euro revenue stream for European banks. The law will likely come into effect in September.

Consumers currently pay a fee through hidden inter-bank rates that lenders impose collectively on retailers. The latter in turn pass these extra costs back to consumers, leading to higher prices. Neither retailers nor consumers have been in a position to influence these transaction fees.

The new legislation will make sure fees will not exceed 0.2 percent for debit card rates and 0.3 percent for credit cards in line with anti-trust deals on cross-border fees.

Banks not amused

"The legislation is good for consumers, good for business and good for Europe," the European Commission said when presenting the bill. "It will lead to lower prices and visibility of costs for consumers."

Under the new law, retailers will enjoy more freedom to choose between cards charging different fees. It will also make it possible for them to accept consumer cards only.

Banks, which have been up in arms about the bill, have kept warning that the move would backfire as retailers would pocket the savings from fee restrictions, while consumers would pay more in terms of upfront banking fees.

hg/cjc (Reuters, AP)