Shops barred from commission on credit card buys

Stores in the UAE have until July 1 to stop carving out commission on credit card buys
Shops barred from commission on credit card buys
Credit charges in the UAE are some of the worlds highest, analysts said
By Elizabeth Broomhall
Tue 07 Jun 2011 02:18 PM

Shops in the UAE will be banned from charging consumers additional fees on purchases made with credit cards from next month, the country’s consumer protection agency said Monday.

Under a ruling from the Supreme Committee for Consumer Protection, retailers will be stopped from imposing surcharges on credit card transactions as commission, effective July 1, 2011.

Credit card fees are sprung on the consumer at the point of payment and are purportedly used to cover the cost to the retailer of processing the transaction.

The ruling, which suggests retailers are making an added profit on purchases, will help level the playing field for shoppers and tackle excessive card charges, said retail analyst Manu Ghai.

“The [credit card] initiative comes as a relief for not only the shoppers and consumers, but also for the companies, credit charges in the UAE being one of the highest in the region,” said Ghai, of London-based consultancy Planet Retail.

“The initiative is expected to support consumer rights, boost economic competitiveness and bring about [retail] growth.”

The UAE said in February that it would curb excessive bank charges to consumers in a rollout of wider regulations aimed at stopping excessive lending practices.

The central bank of the Gulf state capped personal loans at 20 times a borrower’s monthly salary and said repayment periods can’t exceed 48 months.

Monthly installments for all loans, including personal, car, housing loans and credit cards, must not exceed 50 percent of a customer’s gross salary and any regular income, the central bank said.

The move to curb credit card fees from retailers is a further extension of the changes, analysts said.

 “The government has tried to make it difficult for the retail segment to borrow, and they seem to be doing something for the benefit of the consumer as well,” said Naveed Ahmed, a senior financial analyst at Global Investment House.

“They are not doing it from an economic point of view but from a social point of view.”

Retail is a key pillar of the UAE economy, alongside trade and tourism. Dubai, the shopping hub of the Gulf, is expected to see $7.8bn in tourism spending this year alone, according to data from Mastercard.

For all the latest retail news from the UAE and Gulf countries, follow us on Twitter and Linkedin, like us on Facebook and subscribe to our YouTube page, which is updated daily.

Subscribe to our Newsletter

Subscribe to Arabian Business' newsletter to receive the latest breaking news and business stories in Dubai,the UAE and the GCC straight to your inbox.