As part of the EU’s Consumer Protection Cooperation framework, the European Commission and EU and EEA national Consumer Enforcement Authorities (“CPC Authorities”) have recently written to three credit card companies about their role in combatting hidden subscription fees in the consumer space.
Background to the letter
This joint letter follows research by the European Commission which found that many consumers believed they were purchasing a seemingly cheap product or service online, without realising that they were actually signing up to a costly monthly subscription. The European Commission highlights that the payment window for entering credit card details only sets out the initial one-off payment amount, and not the recurring subscription amount. The European Commission is concerned that information about recurring payments is typically hidden from view, or in the small print elsewhere in the consumer journey. Although Britain has now exited the European Union, this letter refers to EU legislation, which has been retained into UK law, and is therefore useful for interpreting the relevant UK regulations.
Obligations on retailers
Under the Unfair Commercial Practices Directive, retailers must ensure they do not take any action or make any omission that may mislead consumers. Omitting or hiding material information that the average consumer needs to make an informed decision (in this case, the price and the subscription nature of the product) would be a breach of these regulations .
Obligations on credit card companies
Transparency and disclosure obligations are placed on Payment Services Providers (PSPs) under the Payment Services Directive. The fact that PSPs will not usually have any particular role in marketing, promoting or selling the products and subscription services in question has no bearing on their liability under these regulations; they are responsible for ensuring the consumer understands the specific amounts they are agreeing to pay.
Comment
The European Commission letter is an important reminder for both retailers and credit card companies in relation to their disclosure obligations. The letter clarifies how the relevant regulations should be interpreted with regards to recurring subscription payments, suggesting that these could apply to any credit card company involved in the payments processing cycle. Specifically, the European Commission and CPC Authorities request that all necessary information be presented in the payment window for the consumer when they make a payment involving recurring subscription fees.
DLA Piper Payments Team
The DLA Piper payments team is a market leading cross-jurisdictional group of specialist payments lawyers. The team has a broad range of clients, from dynamic FinTech offerings to established banks and merchant acquirers. The team advises clients on the full range of payments matters including payment scheme participation, sourcing tech solutions, the regulatory framework, commercial contracts, mobile and online payments, digital currencies and disputes. For more information, please contact the authors.
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