A Variation to the Surcharging Standards:
Final Reforms and Regulation Impact Statement – June 2012 6. The Options

Four main options were considered during the Bank's consultation process. The first option retains the Standards unchanged, while the other three options canvass different approaches to varying the Standards for the designated MasterCard and Visa credit card systems, and the Visa Debit system. For the three options involving a modification of the Standards, the American Express, Diners Club and Debit MasterCard systems would be expected to modify their relevant voluntary undertakings accordingly. The four options are:

• Option 1: No modification to the Standards

Under this option, the existing Standards on surcharging would remain unchanged. The Bank would, however, make a public statement clarifying that the intent of the Standards is to allow merchants to pass through an amount to consumers that reflects the cost of acceptance. The Bank's statement could also provide a possible guide as to the level of surcharges that the Bank considers to be acceptable.

• Option 2: Specific permissible surcharge limit

This option would be a prescriptive approach: setting a fixed cap on surcharges. Under this option, the Board would determine a specific permissible surcharge limit – possibly expressed as a percentage of the transaction value – for the designated systems, with card schemes' rules permitted to limit the surcharge to the permissible level.

• Option 3: Limit surcharges to a merchant's cost of card acceptance, which would be defined clearly as part of the Standards

Another prescriptive option would be to relax the Standards to allow card scheme rules to limit surcharges to the merchant's cost of card acceptance, and for this cost to be defined clearly as part of the Standards (e.g. the Standards might specify that the cost of acceptance is the merchant service fee).

• Option 4: Limit surcharges to the reasonable cost of acceptance of cards

Under this option, the Standards would be modified to allow the schemes to set surcharging limits that are less prescriptive than under Options 2 and 3. Specifically, card scheme rules could limit surcharges to the reasonable cost of acceptance of the cards of that scheme. While the modified Standards would not define the reasonable cost of acceptance, they would specify that the merchant service fee would be included at a minimum. To provide some clarification, the Bank could publish a non-legally binding guidance note on the types of costs that the Bank considers might be included in the reasonable cost of acceptance.