## Monday, January 23, 2012

### A fueling fable: Consumer protection issues with payments

by Naman Pugalia and Viral Shah.

On 22nd December 2011, we purchased petrol worth Rs.100 from an Indian Oil fueling station in Bombay using an ICICI Bank debit card. The receipt suggested that we could have saved a fuel surcharge of 2.5% had we used an Indian Oil Citibank credit card. Upon seeing this message, we asked the cashier at the petrol pump if we would be charged 2.5% over and above the Rs.100 that we paid for the fuel. The cashier assured us that only Rs.100 would be debited from the account linked to the card. The chargeslip and the receipt were:

 The chargeslip

 The receipt
A couple of days later, we viewed the account statement online and found that the relevant transaction had been recorded. A full week later, we observed that an additional charge of Rs.11.03 had been
debited from the account for the same vendor. Not only was the entry unusual, the charge did not match the 2.5% figure which was mentioned on the transaction receipt:

 The statement

We wrote to the bank asking them to explain the transaction. The bank explained that for fuel purchased at non-HPCL petrol pumps, a surcharge of 2.5% of the fuel cost or Rs.10 (whichever is higher) would be levied. A service tax would be levied additionally.

There is a consumer protection issue here. After the account had been debited, and up until we sought a clarification from the bank, we were not made aware of the surcharge. The chargeslip gave a false impression of the amount being paid.

Upon delving further, we find various websites where people have complained about this surcharge being confusing. Further investigation revealed an interesting combination of participants:
1. The surcharge on fuel is mentioned in the fine print in Terms and Conditions of a debit card.
2. The bank that deploys the POS machine (acquiring bank being Citibank in our example), at the end of day, surcharges the higher of 2.5% or Rs.10 and sends it to the customer's bank (issuer bank being ICICI Bank in this case).
3. The issuing bank then creates a separate debit in the customer's account for the surcharge
4. The acquiring bank shares much of this surcharge back to Oil Marketing Company (Indian Oil in this example).
5. Contrast this with typical debit card processing fees in India around 1.5%. In most cases, merchants will inform a customer before surcharging, and the value on the chargeslip is what the
customer pays.
6. Many banks apply these surcharges weeks or months after the transaction actually occurs, which helps ensure that most customers do not understand what is going on.
When paying for fuel in India with a debit card, the customer pays the surcharge by being misled, the Oil Marketing Company makes higher profits, the charge is administered in a non-transparent way, and is posted late when the customer may not even recall the transaction. Thus, Government owned companies and banks have created a perverse incentive, whereby customers prefer to use cash rather than pay electronically.

1. I read your blog regularly and was not able to stop myself from commenting on this post...

Don't you think it is our responsibility to understand Surcharges. All Cards, Credit/Debit do charge a Surcharge of 2.5% even cards that say Zero Surcharge charge 2.5% for transactions lower than 400/500 Rs

There are many cards that give you this back and also a 2.5% cash back for fuel spends .. Maybe you need to look around.

Also again how is the Oil company earning more profits...

2. @Ganesh : I see no reason why surcharge has to be debited from a/c on a separate date. And I agree with the article that consumers are misinformed or effectively uninformed for various transaction charges.

3. If you swipe a Citibank Card at an Indian Oil pump, and citibank EDC you are not charged this surcharge.

But the information is there in the charge slip. If you swipe for Rs 100, the charge slip will show a charge of Rs 110 minus Rs 10 surcharge waiver! But if you don't swipe it at a Citibank EDC (or Indian Oil pump), the charge slip will be exactly like you mentioned!

4. Why is it that there is surcharge only on fuel. It would make sense, if IOC would receive only 97.% after citibank deducts 2.5%. But if most of that 2.5% actually flows back to the fuel retailer than what is the sense in the surcharge. Also, why is it charged only with fuel and not with any other purchases?

5. Typically Banks charge retailers a fixed percentage (2% - 5%) for providing machines and helping them to increase business. Fuel retailers are not ready to pay this percentage since they don't have dearth of business. However banks wants to allow credit card holders to use cards for fuel and hence they charge holders fuel surcharge. Some banks have tie-up with fuel retailer (for e.g., ICICI Bank with HPCL, Citibank with IOC) where they won't charge this surcharge. Fuel retailer should use their EDC only.

Banks won't get benefit from a person who uses credit card judiciously. If any one misses payment, banks make a ton.

6. I don't think there is anything new in fuel pumps charging an extra 2.5%. This has been there for long. With my ICICI Bank-HPCL credit card, it is clearly mentioned that the Surcharge waiver would be there only in select HPCL bunks which use ICICI machines. In all other bunks there would be a surcharge.

Ashok

1. Icici HPCL credit card charging the fuel surcharge even if you do the transaction at HPCL outlet with ICICI machine. be careful and check each and every fuel transaction done.

7. HPCL pumps which are operated by company itself are free from surcharge when ICICI-HPCL card is used.

Better use Platinum/Signature credit card as it works on all of the HPCL/IOC , plus their is no surcharge.
A small List of surcharge free transaction @
============

Amex Gold user -> HPCL company owned pump
HDFC Signature/Platinum plus -> Any pump , surcharge get reversed after 2-3 days .
Citi Platinum/Citi IOC -> No surcharge @ IOC pumps only
Standard Charted Value card -> surcharge get reversed plus 2.5% cash back too...

8. I saw that some vendor ask upfront 2% of payment we need to paid or ask us to pay through card. But that there problem why they ask normal costumer to do so and why why write "Card accepted here" that out of my way.

M.

9. Govt. should fix responsibility of authority to cheating the consumer
if No initiative taken against them other services will make their way to looting

10. I agree that nobody likes to see an extra charge on the credit/debit card statement when one did not know about it but in today's world almost everything comes with a fine print, and we are supposed to be aware of it.

The only thing that I can find wrong is on the part of the cashier who mentioned only Rs 100 will be charged - whether Rs 100 was inclusive of surcharge, or not is again based on the T&C's of the card that you are using.

However, just yesterday's TOI article mentions the practice of ICICI enforcing its own terminals at all HPCL retail outlets like In&Out resulting in all these transactions being marked as fuel purchases and hence subject to fuel surcharge.

11. Guys!! Recently I have got the hdfc platinum credit card and I have used it for Rs 150 in indian oil petrol bunk and just now I have seen that I am seeing Rs 160 in the statement.
Sorry to say I think We (Customers) are fools to use the stupid credit cards.

I am thinking to use credit card in emergency not every time.

Regards,
Srinivas

12. I PURCHASED PETROL RECENTLY TWO TIMES OF RS.100 EACH ANY IN PAY SLIP SHOWS 100BUCKS ID DEBITED FROM MY ACCOUNT N NEXT DAY WHEN I SAW MY STATEMENT BANK LEVIED 10 10 RUPEES SURCHARGE AND NOT SEND ME TRANSACTION ALERTS OF THIS TRANSCATION ON MY MOBILE WHATS THIS BLUNDER I CANT UNDERSTAND WHEN I ASK ABOUT THIS FROM MY BANK CUSTOMER CARE THEY SAID YOU HAVE TO PAY SURCHARGE EVERY TINE WHENEVER YOU TRANSACT (swap your debit card in pos terminals ) without notification of these charges bank levied these charges

13. Your A/C number is visible to public, you need obscure it .

14. I dont belive that Banks would "share" the Tax collected back to the vendor i.e oil company. On the contarary , if Petrol Pump owners would find that Bank had deducted 10 % as service / transaction charges from them as well.As a vendor , thats my experiance. Banks or any commercial institute is not supposed to shower charity on people. UNLESS GOVT. MAKE ELECTRIONIC TRANSACTIONS FREE FROM SERVICE TAX THIS WILL GO ON .

15. Today I saw surcharge, then I call HDFC bank, they agree to repay and will not charge it again...
i think we need awake for our rights..

16. I was charged 52 rs for the same as fuel surcharge. So I called HDFC & enquired about that. They told me this charges are being taken by culprit icome tax dept. & we already notified our customer regarding this. So I told them i didnt had any communication. Then they checked and told me that they are going to reimburse money. :)
We just have to awake and fight ! :-)

17. Similarly, I filled diesel for my car for Rs.300 and I signed the receipt for the same amount, but I was charged Rs.11.04, after 4 or 5 days. I was confused when I received an SMS from the bank for debiting the amount, and one of the staff member was kind enough to explain me this and also informed me that Petrol pumps do charge a surcharge for fuel purchase. The 11.04rs is what I still don't understand, it's more than 2.5% !! And, I have always used my debit card, almost 98% so far in the petrol stations but this is kind of new to me now. I was not charged before nor I got an SMS of this kind before. I don't understand what's happening. Please give me suggestions
1. Does HPCL petrol stations have a surcharge free policy ?
2. Or, what is the alternate source ? I never use Credit Cards at all, touching it is like touching fire to me!!

Thanks

18. I had same issue with my SBI credit card and i have been using for a long time, not noticed till date. Unknowingly i have noticed transaction which i have made couple of days back. When i spoke to the SBI customer care they have replied with the same message on surcharge.

Final conclusion what i have understood is indian political system don't us to be transparent in money transactions. And want us to follow them in growing the black money and use the black money only.

Thanks

19. I have Same issue . Last month I purchased two time Petrol from HP petrol pump of Rs. 500 and 650.through my SBI Credit Card and got receipt on same ammount. I thought I save both time 2.5% amount as my bank Saying. but when I received statement ,I paid to Petrol Pump Rs.514.05 and 668.06 . this is more then my saving. I think , Is it the policy to make foolish to costumer only.

Thanks

20. Hey guys, this 2.5% is charged by all the banks on their credit cards and it goes to the bank, not the fuel retailer. If you don't want to be charged for this, please get some credit card which waives off this surcharge. There are plenty available in the market. I use HDFC Bank Superia and my bank refunds me the surcharge amount every time, whether I fill at BPC, IOC or HPC outlet. There's no cheating involved, it's just consumers' ignorance.

21. Of knowing all the above facts, is it necessary to use debit cards at fuel stations by PAYING extra money

1. no, pay cash and ask for a receipt

22. I think this matter should be taken up with the RBI. Instead of encouraging use of plastic money ( payments through debit cards or credit cards ) this arbitrative levy of surcharge is forcing people to use cash . Will some one take the lead ?

23. on digging further I find that BRI has clarified this matter. Their letter no. RBI?2013-14/292 DBS.CO. PPO No. 3578/11.01.005/2013 dated Sept. 25th 2013 states that it is unfair to charge this extra ammount. They directed the banks to discontinue this practice. Still some banks are charging this sur charge. What should be done . Take the matter to the Consumer's court ?

24. Credit /Debit card companies are fooling the consumers.They claim to waive surcharge at selected or all petrol pumps .They never inform customers that first they will levy additional surcharge and then will waive it off ,Service tax remains untouched.If you are paying 100 in cash,you are getting petrol of 100,as simple as that.Whereas,when you are buying petrol /diesel with card for 100,you are paying 100+surcharge (2.5% or Rs.10,whichever is higher)+Service tax.This tallies upto 111 approx.After waiving off surcharge(If Lucky enough),you still pays 100 +Service tax..What's the fun.Purchase in Cash instead...best option.

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