“Credit and debit card consumers have cause for concern over the RBA’s proposed changes to interchange fee regulation,” said Aaron Lane, National Campaign Director of Don’t Let Them Pass the Buck.
Today, the RBA’s Payment Systems Board released a consultation paper on changes to the RBA’s Standards for Card Payment Systems.
“The weighted-average benchmark interchange fee for credit cards will remain at 0.50 per cent. This is a small victory for consumers because it was widely feared that it might be further regulated. However, on closer inspection this is just a smokescreen: the RBA is seeking to reduce the weighted-average benchmark for debit cards, and to introduce a 0.80 per cent cap on credit card interchange fees.
“This is a price-ceiling by stealth,” explained Mr Lane.
“The RBA is trying to pick winners by regulating premium cards out of existence. The RBA doesn’t like reward points, or interest-free periods – it wants everyone to have a no-frills credit card. The RBA wants to deprive consumers of choice and competition.
“The RBA should not have the power to micro-manage what types of cards consumers can access, and how consumers pay for their goods and services,” said Mr Lane.
In 2003, the RBA introduced a series payment system regulation changes. Amongst other things, this included the elimination of no-surcharge rules, and the regulation of interchange fees. The Competition and Consumer Amendment (Payment Surcharges) Bill 2015, introduced into Parliament this week, will ban excessive payment surcharges.
“The RBA is proposing further regulation of interchange fees based on poor theory, and even poorer evidence. The RBA’s own figures show that interchange fee regulation has cost Australian consumers over $8 billion dollars over the last 12 years. The RBA is at risk of repeating its mistakes,” said Mr Lane.
“We are pleased to see the Turnbull government mopping up the RBA’s mess on surcharging. Yet the problems of surcharging have arisen because the RBA got it wrong in this first place. The consultation paper is further evidence that the regulatory powers should not rest with the RBA, but with the prudential regulator.
“It is also unclear why the RBA’s highly secretive Payment Systems Board decided to pre-empt the findings of the transparent Senate inquiry,” said Mr Lane.
On 24 June 2015, the Senate referred an inquiry into matters relating to credit card interest rates to the Senate Economics References Committee. The committee is examining interchange fees amongst a range of issues. The Australian Taxpayers’ Alliance made a submission to the inquiry, and appeared before the committee on the 16 October 2015 at a public hearing held in Sydney. The committee’s report is now expected to be released on 16 December 2015.
“The threat to low-income Australians is real. The RBA can’t regulate cost out of the market. Increased regulation is likely to force banks to raise costs on people who just have bank accounts rather than credit cards. Similar moves in the United States caused 1 million Americans to become unbanked.
“Interchange fees pay for things like credit card fraud protection, interest-free periods, and credit card rewards programs which all provide significant benefits to consumers. They promote competition and innovation in the financial sector. These are all under threat by the RBA’s increased regulation,” concluded Mr Lane.
The Australian Taxpayers’ Alliance is a grassroots advocacy and activist organisation comprising of over 25,000 members dedicated to representing taxpayers and opposing over-regulation. Earlier this year the ATA launched a new online campaign ‘Don’t let them pass the buck’ – fighting proposals to increase regulation on interchange fees.
Twitter: @nobuckpassing #dontpassthebuck
Aaron Lane, National Campaign Director.