Three out of five firms that issue councils with pre-paid cards have admitted to breaching competition rules and agreed to pay maximum penalties totalling over £32m.

The Payment Systems Regulator (PSR) has alleged that Mastercard, allpay, APS, PFS and Sulion engaged in anti-competitive behaviour by agreeing not to poach each other’s clients.

The case relates to pre-paid cards that are used by local authorities to distribute welfare payments to vulnerable members of society.

The regulator alleges that there were two infringements of the Competition Act 1998 that took the form of market sharing or customer allocation. One lasted between 2012 and 2018 and involved all five parties and the other was between 2014 and 2016 and involved APS and PFS.

Chris Hemsley, managing director of the PSR, commented: ‘Pre-paid card services, like these, can provide significant benefits to local authorities as one way to make welfare payments to some of the most vulnerable people in society.

‘By colluding in this way, we consider the parties were acting as a cartel. Because of the reduced competition local authorities may have been missing out on an alternative supplier or products that were either cheaper or better suited to both their needs and the needs of those using the pre-paid cards.

‘Collusion in payments is absolutely unacceptable. Where we see it happening, we will take action, stop it, and seek to impose significant penalties.’

Mastercard, allpay and PFS agreed to settle last month and admitted that they took part in the alleged anticompetitive arrangement. Should the PSR ultimately conclude that there have been infringements, the three companies have agreed to pay fines of £32m.