Drivers pay £40m by card fees on road tax

MOTORISTS have paid £40 million in “rip-off” credit-card charges when buying road tax in the past five years.

The Driver Vehicle and Licensing Agency (DVLA) has been accused of failing to pass on the savings from a charges cap after a freedom of information request revealed the scale of the fees.

The DVLA has levied a flat fee of £2.50 on 17 million motorists who have paid their Vehicle Excise Duty by credit card since 2012. This works out at about 1.5 per cent on the average road tax bill but can account for as much as 25 per cent of the lowest rate bands. Consumer groups say that the price of processing the average credit-card transaction is 0.6 per cent.

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James Daley, of Fairer Finance, said: “What hope do we have of commercial operators abandoning these unfair charges if government bodies don’t?” The DVLA’s fee has not been cut despite laws in 2015 that put limits on what credit-card providers can charge third parties to process payments.

Last year companies including British Airways and Flybe cut their credit-card fees after the European directive capped part of the wholesale cost of transactions at 0.3 per cent, reducing by about 0.5 percentage points the cost of processing payments.

The charge is “Clearly not in the spirit of the law”

Mr Daley said: “The DVLA has either made a saving in credit-card processing because of this cap and not passed it on to motorists or it has not gone back to its bank to ensure that it is benefiting from the reduction. Either is unacceptable.”

Last month, the government warned companies and public bodies that their charges should not be more than the cost of processing transactions.

The DVLA insists that it does not make a profit from the fees when staff and IT costs are taken into account. It refused to provide a detailed breakdown of the cost of processing payments, citing commercial confidentiality.

Mr Daley said that the charge was “clearly not in the spirit of the law”. He added: “The DVLA does not offer an itemised bill to motorists on the cost of lighting its offices, so there is no reason they should break out the cost of making a payment. Accepting payment is just the cost of doing business and customers should not be charged separately.”

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From April, reforms to road tax bands, which will force owners of even low emission cars to pay the duty, will increase the average credit-card fee to about 1.8 per cent per transaction.

A spokesman for the DVLA said: “We want to give customers as much flexibility as possible — without the fee we would not be able to offer the option to pay by credit card.”

He added: “We don’t profit from these fees. They help to cover the cost that credit-card companies levy against the transaction.”

Andrew Ellson, Consumer Affairs Correspondent

This article first appeared in The Times