Penalties introduced for refusing credit card payments

The Cabinet of Ministers has introduced administrative liability for refusal to accept payment with a credit card. The Cabinet Resolution "On amending Item 2 of the Regulation on procedure to impose and collect fines for violation of consumer protection legislation," a fine of 500 non-taxable minimum incomes of citizens (NMDG), that is 8,500 UAH for restriction or denial to a customer of a free choice of products and forms of payment, will be imposed, the Information-analytical Bulletin of the Cabinet of Ministers of Ukraine informs.

Experts cite the Law "On consumer protection," under which customers can demand from all business entities which use cash registers to also accept payment by credit card. In case of refusal, consumers can seek protection of their rights with governments consumer rights protection agency.

Repeated violations will increase the amount of the fine. Article 16313 of the Code of Administrative Offences, which says failure to comply with the legislation on payment for goods (services) with electronic means of payment, provides for imposing second violation fines from 500 to 1000 NMDG (8,500-17,000 UAH).

Experts say refusal to purchase and maintain a credit card terminal (est. cost 3,000 to 5,000 UAH) will become unprofitable in view of the prohibitive penalties.

The measure is designed to bring the "Regulation on procedure to impose and collect fines for violation of consumer protection legislation" in conformity with the requirements of the Law "On amending certain legislative acts of Ukraine concerning functioning of payment systems and development of non-cash transactions."

Terminals by law are not needed in detached stalls, in market places or in towns with a population under 10,000. Experts say the Cabinet may approve another bill requiring electronic means of payment to be accepted by all entities conducting business in towns with a population of over 25,000 in 2014. Additional measures would have card payments should be introduced in all points of sale in Ukraine by 2018.

Government analysts say increased penalties for failure to accept a credit card is aimed to increase circulation of electronic money in Ukraine and reduce cash transactions. There are about 200 billion USD in circulation outside the banking system in Ukraine today. These and other measures of the government and the National Bank of Ukraine will bring them to legal circulation and increase budget revenues. In addition, experts say, the increase in non-cash operations will save budget funds for maintenance of the cash market that must be printed, transported, counted, stored and guarded. For example, printing each 2 hryvnia bill costs the state 70 kopecks. Given the costs of storage, collection of paper money, their cost ends up to be 30% above the nominal cost of the bill.

Experts suggest that for now Ukraine is about 4 times behind European countries in terms of POS-terminal saturation. However, for the last three years the rate of non-cash payments in Ukraine is up by five times. In 2007 the number of non-cash transactions with payment cards was 8.5%. By 2012, it had risen to 32.4%. The figure in Europe exceeds 90-95%.

According to government estimates, the state would receive an additional 35-50 billion UAH of free money that can be channeled into the real economy and into social programs if the level of non-cash payments in Ukraine can brought to the European level (80-90% of total payments).