PSR Fines NatWest Group For Interchange Overcharge

May 13, 2022
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The UK’s Payment Systems Regulator (PSR) has punished the retail banking group after four of its banks failed to comply with the Interchange Fee Regulation.

The UK’s Payment Systems Regulator (PSR) has punished the retail banking group after four of its banks failed to comply with the Interchange Fee Regulation (IFR).

The PSR has taken action against NatWest Bank, Royal Bank of Scotland, Ulster Bank and Coutts & Company, which are all part of the NatWest Bank Group, for overcharging interchange fees on credit cards.

The £1.82m fine was for non-compliance, but the regulator said its action also ensured that those overcharged by the banks were able to get their money back.

“The interchange fee caps were put in place to reduce the cost of accepting customer card payments for shops and other merchants’ businesses,” said Chris Hemsley, managing director of the PSR. “The banks broke the rules by failing to bring themselves in line with the caps.”

He continued: “As demonstrated in this case, we will intervene and take robust action where needed to ensure compliance, including with the Interchange Fee Regulation.”

The issue was spotted by the payments watchdog during regular monitoring activity it carries out in its role as the primary UK authority for enforcing the IFR.

The banks incorrectly treated a number of cards as being "commercial" cards when they should have been treated as "consumer" cards, which meant that fees charged by these banks were not capped and were set at too high a level.

As a result, both acquirers and, ultimately, merchants were overcharged, and the PSR found that the banks wrongly profited from almost £1.2m in excess interchange fees between March 2016-18.

The PSR first opened an investigation in May 2018, with the PSR stating that the banks agreed to settle at the earliest possible stage, therefore qualifying for a 30 percent early settlement discount.

Were it not for this discount, the PSR would have imposed a total financial penalty of £2.6m on the banks.

When approached by VIXIO for comment, a spokesperson for NatWest Group said: “We regret that between March 2016 and March 2018, we failed to comply with two regulations in relation to interchange fees received on a limited number of credit card based payment transactions in the UK. We accept both the findings and today’s penalty issued by the PSR.”

The spokesperson continued: “In 2019 we concluded a remediation exercise which fully reimbursed, to the small number of entities impacted, any excess interchange fees the group received during this period. We have also taken the appropriate actions to ensure the group now complies fully with these relevant regulations.”

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