The Australian Competition and Consumer Commission welcomes the Reserve Bank of Australia's credit card reforms, ACCC Chairman, Professor Allan Fels, said today.
"The ACCC has worked closely with the Reserve Bank since the designation of the credit card network in April 2001 and strongly believes that the reforms will lead to a more competitive and efficient credit card network in Australia.
"Increased competition and efficiency will be to the benefit of both Australian businesses and consumers.
"The Reserve Bank has announced three reform measures:
- first, the introduction of a system allowing new entrants to issue credit cards or provide merchant services.
"The access reforms will open up the 'closed shop' credit card market while at the same time ensuring, through the Australian Prudential Regulation Authority, the safety of this market for all participants.
"Importantly, the opening up of the credit card market has the potential to lower prices overall for credit card services, in a manner similar to the way in which new entry into the mortgage market by non-banks pushed down the interest margins on home mortgages. This will be of significant benefit to both consumers and businesses.
- second, a standard establishing a cost based methodology for the calculation of interchange fees
"Interchange fees in Australia have traditionally been set without any external scrutiny or public accountability. The Reserve Bank interchange fee reforms will break open these closed doors and replace them with a process that is both transparent and open to public scrutiny.
"The regulated reduction in interchange fees should also lead to a reduction in the burden of bank fees paid by retailers, particularly small businesses. Competition in the retail market should ensure that businesses pass this benefit on to consumers.
- and finally, the end of the restrictions imposed by credit card schemes which prevent merchants from recovering from card holders the costs of accepting credit cards
"Merchant pricing restrictions currently prevent businesses from recovering the cost of accepting credit card payments directly from those consumers who pay for goods or services by credit card. This means that businesses have no choice but to pass the cost of accepting credit card payments through to all consumers in the price of retail goods and services.
"The means that consumers using credit cards are not necessarily those who ultimately bear the cost of their credit card transaction and that consumers who do not use credit cards may be subsidising those that do.
"While overseas experience suggests that a majority of merchants may not choose to impose a credit card fee, businesses that do elect to charge such a fee must ensure that they do not breach their statutory competition and consumer protection responsibilities. Consumer protection responsibilities for such transactions are vested in the Australian Securities and Investments Commission".