Credit card companies warned over fees

BIG financial firms are not to gouge customers with higher merchant fees, otherwise the big stick of more regulation will be enforced, the Reserve Bank of Australia (RBA) has warned.

Credit card fees have risen 170 per cent in the past five years.

RBA assistant governor of financial systems Philip Lowe said today the central bank would not hesitate to increase regulation if the industry, left to its own devices, raised interchange fees.

An interchange fee is the fee that banks charge each other when someone uses a credit card. It involves a payment from the shop owner’s’bank to the shopper’s bank at an agreed rate.
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Mr Lowe told the Visa Forum at Hamilton Island in Queensland that RBA board was prepared to reduce interchange fee payments regulation if the financial industry lowered fees, which should flow to customers.

"The board would, however, consider re-regulation if, after having stepped back, interchange fees were to subsequently rise materially," Mr Lowe said a speech entitled `The Preliminary Conclusions of the Payments System Review''.

"It does not see a case for higher average interchange fees in the credit cards system that currently exist."

The reforms of the payments system has "largely" met the objectives, Mr Lowe said.

The improving price signals to cardholders, increasing transparency, the better access arrangements and removing the restrictions on merchants that limited competition have made a stronger environment for consumers, Mr Lowe said.

"The board sees absolutely no case for winding back the reforms in any of these areas," he said.

"Indeed, it has suggested additional step that would give merchants even more choice, that would further improve transparency, and that would reduce the cost of access."

Article Source: News.com.au

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