Rba Could Wipe Fee Cap On Cards
The Age
Monday September 29, 2008
REGULATIONS governing the credit card service fees paid by merchants could be removed within a year if card companies accede to Reserve Bank recommendations.
The RBA announced the incentive at the culmination of its 2007-08 review into the rules governing payment systems, such as credit card and EFTPOS, in Australia.Current regulations dictate card companies such as Visa and MasterCard should charge merchants fees of no more than 0.5% of the total transaction; intervention that card companies claim is unnecessary and hinders competition.The RBA said the reforms formulated in the past five years of the review, such as allowing merchants the right to surcharges for credit card transactions, had delivered "significant benefits" to competition."The enhanced competitive environment does, however, provide an opportunity to consider stepping back from the regulation of interchange fees, although the board remains concerned about the strength of the competitive forces acting on these fees," the RBA said in the Reform of Australia's Payments System report."Given these concerns, the board will only step back from regulation in this area if industry participants take further steps to reduce the risk that interchange fees in the credit card system increase from current levels in the absence of regulation. If such steps are not taken, interchange regulation will continue."The RBA highlighted three reforms which, if adopted by industry, would probably persuade it to remove the regulation of fees: that fees charged on scheme (credit card company) debit cards match fees for debit cards using the Eftpos system; that merchants be able to accept credit cards without accepting the related scheme debit card, or vice-versa; greater disclosure of the interchange fees payable for each type of card.Some submissions called on the RBA to block surcharges because of the potential to discourage credit card use. But the RBA said there was evidence from card companies and merchants to suggest "the ability to surcharge is putting some downward pressure on interchange fees and merchant service fees in some areas".The RBA will make a final decision next August, largely depending on the actions of the card companies between now and then.KEY POINTS- Current regulations restrict merchant fee to no more than 0.5% of total transaction.- RBA highlighted three reforms card companies would need to adopt.
© 2008 The Age
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