The cost of woolly language - how weakly worded regulation swindles small businesses

Regulation should be clear, concise and easy to follow. It should set out exactly what is permissible - and what isn’t. Unfortunately, regulation doesn’t always achieve this. Legalese contorts, caveats and confuses what should be clear instructions. This leads to different interpretations and bad outcomes.

Last year, UK small businesses lost £2.8 billion as a result of weakly worded regulation. The money is lost to ‘hidden fees’ - the fees providers charge for international payments, but hide in their exchange rates.

These fees aren’t just hidden - they’re often denied altogether. It is common for providers, usually traditional banks, to claim their services have ‘zero fees’ or ‘0% commission’, all while they charge a fee of 2.5 - 3.7% in the exchange rate. This rips off small businesses. It also destroys any idea of fair competition as time-strapped small businesses do not have the tools to compare the market, worsening the problem.

For small businesses regularly transferring thousands of pounds, euros, rupees and dollars across borders, this quickly adds up - and it deters and stifles growth. New research by Censuswide, which surveyed over 3,000 UK small business owners nationwide, finds that over a quarter of SMBs are put off from overseas expansion by the high cost of international banking services. It is a trade barrier by stealth.

The good thing is that the barrier could easily come down. We just need good, clear regulation. The bad thing? Existing regulation is poorly worded and not enforced. International payments are supposed to be regulated by the Payment Services Regulations (PSRs - regulation and acronyms have a long-running love affair) and the Cross-Border Payments Regulation (CBPR2, see). These regulations are supposed to ban hidden fees, but they leave room for interpretation and are weakly enforced.

The PSRs state that providers must show “the amount of any charges payable to the payment initiation service provider in relation to the payment transaction”, while CBPR2 asks providers to disclose “all currency conversion charges”. In both cases, the lack of specificity is used by old-school providers to argue that hidden fees are fine, and not covered. So, we all suffer from hidden fees. The problem is most acute for small businesses. The PSRs contain a nonsense ‘corporate opt out’ from these transparency requirements which means the legislation needn’t even apply to businesses.

What’s needed is quite simple and refreshingly plain. There is no need for more funding, more thinking, more consulting or any of the other routes usually taken to try and hack at a trade barrier. The taxpayer doesn’t need to lose a penny.

What’s needed is clear language. Firstly, end the opt out for transparency. Then, most importantly, clearly and specifically ban hidden fees. It’s really a quite simple change - but it’s one that could mean everything to the growth prospects of the nation’s small businesses.

Agree? Sign our petition at Wise.com/endtheoptout.