House of Representatives Committees

Standing Committee on Economics, Finance and Public Administration

Review of the Reserve Bank of Australia annual report 1998-99

Media release: 29 September 1999

RESERVE BANK RAISES QUESTIONS ON CREDIT CARD COSTS

'All customers may be subsidising credit card costs, irrespective of whether they benefit.'

Chairman of the House Economics Committee, Federal Member David Hawker, today said 'Merchants are paying to subsidise loyalty and other reward schemes (the fees of which are passed onto all customers, not only those using credit cards) according to the Reserve Bank's first Payments System Board annual report released today.'

'Clearly other customers who don't benefit from those schemes may be losing out' Mr Hawker said.

Mr Hawker said 'This matter is of concern to the Economics Committee as are a number of other issues raised in the Payments System Board (PSB) report.'

For example, last week the Reserve Bank and the Australian Competition and Consumer Commission announced an inquiry into interchange fees between providers of Automatic Teller Machines (ATMs), Electronic Funds Transfer Point of Sale (EFTPOS) and credit cards. These fees are an essential part of the pricing structure in card schemes and have important implications for the efficiency of the retail payments system.

The PSB report points out that interchange fees could be anti-competitive by unreasonably restricting access to ATMs and EFTPOS networks and can make it difficult for new and smaller players to enter the business. It also notes the lack of transparency of interchange fees to the card-holder or sometimes the merchant. 'An inquiry into those matters is timely', said Mr Hawker.

Another critical matter raised in the report is that while 17 banks have met the three day cheque clearing standard set by the PSB, some others have not. This includes two of the major banks (as at 31 August 1999). This is particularly of concern since the report revealed that cheques are the most frequent form of payment used in Australia apart from cash.

The Payments System Board stated that, it '…remains concerned that not all customers are sharing in improvements in cheque clearing' and the Economics Committee shares that view.

'A further matter to be considered is an apparent push by the Payments System Board for the greater use of direct debits. The report says this is a highly efficient way of paying routine bills but it has not found ready acceptance in Australia compared to other G10 countries.'

Mr Hawker concluded by saying 'While Australia has a relatively safe and resilient payments system, the Economics Committee will be following up these and other payments issues with the Reserve Bank Governor, Ian Macfarlane (also Chairman of the Payments System Board) on 29 November in Sydney at the Committee's biannual meeting with the Bank.

Ends
29 September 1999

Further information:
David Hawker MP (Chairman) 02 6277 4100
Beverley Forbes (Secretary) 02 6277 4582
Email: EFPA.Reps@aph.gov.au

Committee Membership 39th Parliament

Chairman: Mr David Hawker MP
Deputy Chairman: Mr Gregory Wilton MP
Members:
Mr Anthony Albanese MP
Ms Anna Burke MP
Ms Teresa Gambaro MP
Mrs Kay Hull MP
Mr Mark Latham MP
Mr Christopher Pyne MP
Hon Alex Somlyay MP
Dr Andrew Southcott MP

For a copy of the Payments System Board annual report 1999 see:

Reserve Bank of Australia website: http://www.rba.gov.au/RBAhome.html