RBS 2014 Annual Report Download - page 115

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RBS – Interim Results 2015
Notes
16. Litigation, investigations and reviews (continued)
Multilateral interchange fees
On 11 September 2014, the Court of Justice upheld earlier decisions by the EU Commission and the
General Court that MasterCard’s multilateral interchange fee (MIF) arrangements for cross border payment
card transactions with MasterCard and Maestro branded consumer credit and debit cards in the EEA are in
breach of competition law.
In April 2013, the EC announced it was opening a new investigation into interchange fees payable in respect
of payments made in the EEA by MasterCard cardholders from non-EEA countries.
In May 2013, the EC announced it had reached an agreement with Visa regarding immediate cross border
credit card MIF rates. This agreement has now been market tested and was made legally binding on 26
February 2014. The agreement is to last for four years.
In addition, on 8 June 2015, a regulation on interchange fees for card payments entered into force. The
regulation requires the capping of both cross-border and domestic MIF rates for debit and credit consumer
cards. The regulation also sets out other reforms including to the Honour All Cards Rule which require
merchants to accept all cards with the same level of MIF but not cards with different MIF levels.
In the UK, the Office of Fair Trading (OFT) had previously opened investigations into domestic interchange
fees applicable in respect of Visa and MasterCard consumer and commercial credit and debit card
transactions. On 6 May 2015, the successor body to the OFT, the Competition & Markets Authority (CMA),
announced that it had closed these investigations on the grounds of administrative priorities.
There remains considerable uncertainty around the outcomes of the ongoing EC investigation, proceedings
and regulation are not yet fully known, but they may have a material adverse effect on the structure and
operation of four party card payment schemes in general and, therefore, on RBS’s business in this sector.
Payment Protection Insurance
Since 2011, RBS has been implementing a policy statement agreed with the FCA for the handling of
complaints about the mis-selling of Payment Protection Insurance (PPI). RBS has made provisions totalling
£3.8 billion to date for this matter, including £0.1 billion in the six months ending 30 June 2015, of which £3.1
billion had been utilised by that date.
RBS is monitoring developments following the UK Supreme Court’s decision in the case of Plevin v Paragon
in November 2014 that the sale of a single premium PPI policy could create an ‘unfair relationship’ under
s.140A of the Consumer Credit Act 1974 (the ‘Consumer Credit Act’) because the premium contained a
particularly high level of undisclosed commission. The Financial Ombudsman Service (FOS) has confirmed
on its website that unfair relationship provisions in the Consumer Credit Act and the Plevin judgment are
’potentially relevant considerations’ in some of the PPI cases referred to FOS. On 27 May 2015, the FCA
announced that it was considering whether additional rules and/or guidance are required to deal with the
impact of the Plevin decision on complaints about PPI generally. RBS is in active dialogue with FOS and the
FCA on this issue. At this stage, as there remains considerable uncertainty regarding the application of the
Plevin decision (including to previously settled cases), it is not practicable reliably to estimate the potential
impact on RBS, which may be material.