CREDIT CARD REFORM WELCOME NEWS FOR CONSUMERS

Today's release of the Reserve Bank's proposals for credit card reform is a positive development for Australian consumers, according to Chris Connolly, Director of the UNSW Financial Services Consumer Policy Centre.

"Consumers have been paying higher prices for goods and services because of the hidden interchange fees built into the credit card system," said Mr Connolly. "These reforms will replace an expensive hidden fee structure with a cheaper, transparent fee structure. These reforms are long overdue."

Mr Connolly noted that the Reserve Bank's discussion paper (released this morning) offers three significant reforms: a new objective standard for setting interchange fees; the end of the "no surcharge rule"; and the opening up of the credit card system to new players.

"We hope that the Reserve Bank will see these reforms through, and will not be swayed by the massive lobbying efforts of the banks and credit card companies," said Mr Connolly. "Consumers can look forward to interchange fees falling by more than a third under the new standard. This will mean lower prices on all goods and services as hundred of millions of dollars a year are removed from merchant costs."

Mr Connolly also welcomed the abolition of the 'no surcharge rule'. "The 'no surcharge rule' has made it impossible for businesses who accept credit cards to pass on the transaction fee (nearly three percent of each transaction) to customers using credit cards. Instead, they have passed on the fee to all of their customers through higher prices. This inequitable process has been forced on retailers by the banks - finally it is being removed."

"The Reserve Bank discussion paper exposes the banks' tactics in hiding fees, setting prices collectively, and heavily promoting credit cards because they make the most profit for banks - not because they are the best product for retailers or consumers," said Mr Connolly.

CONTACT DETAILS:
Chris Connolly, Director Financial Services Consumer Policy Centre, 0414 938942
Khaldoun Hajaj, Financial Services Consumer Policy Centre, 0404 078692
Victoria Collins, Public Affairs and Development, UNSW, 9385 3644