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Commission Settles With Visa On Interchange Fees

Contributor:
Fuseworks Media
Fuseworks Media

Wellington, Aug 12 NZPA - The Commerce Commission has settled the issue of credit card interchange fees with Visa after the card company approached it.

Visa has agreed to a range of actions to improve competition and disclosure and will contribute $2.6 million toward the commission's costs in pursuing the issue.

The commission will discontinue its proceedings against Visa in the High Court. It alleged that interchange fee rules breached the restrictive trade practices provisions of the Commerce Act.

Proceedings are under way against a range of banks and card companies.

The commission said today that it had signed an agreement with the Visa International Service Association and Visa Worldwide Pte Ltd (Visa) settling claims against Visa.

Credit card issuers will now be able to individually set the interchange rates that will apply to transactions using their credit cards, subject to maximum rates determined by Visa. These rates will be publicly available.

Merchants will no longer be prevented from applying surcharges to payments made by credit cards or by specific types of credit cards. Merchants will also be able to encourage customers to pay by other means.

Visa will open its network to non-banks if they meet relevant financial and prudential criteria.

Commission chairman Mark Berry welcomed Visa's initiative in approaching the commission and said the agreed changes would improve competition between companies that provide credit card services to retailers in New Zealand.

The agreement reinforced the commission's stated approach of resolving issues in the most timely, cost-effective way.

The commission also has claims against ANZ National Bank Ltd, Bank of New Zealand, Westpac New Zealand Ltd, ASB Bank Ltd, Kiwibank and TSB Bank Ltd in relation to interchange fees in the Visa scheme, which continue, as does its claim against those banks, MasterCard and The Warehouse Financial Services Ltd in relation to the MasterCard rules. These are expected to be heard at the High Court in Auckland in October this year.

Each time a Visa or Mastercard cardholder makes a purchase, the retailer pays a fee to their own bank as part of the payment authorisation process. That fee is comprised mainly of the interchange fee, which is paid to the cardholder's bank.

The retailer is not allowed to recover the fee from the cardholder and therefore all customers bear a cost in higher prices regardless of how they pay.

In 2003, the Reserve Bank of Australia moved to regulate the level of interchange fees, reducing the fees over time from 0.95 percent of transaction value to less than 0.5 percent.

Public and private competition enforcement actions have also been brought in respect of interchange fee arrangements in other jurisdictions, including the US and the UK.

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