CONSUMER GROUPS WELCOME CREDIT CARD REFORM

The Financial Services Consumer Policy Centre at the University of New South Wales Faculty of Law, welcomed the release today of the Reserve Bank's credit card reforms.

"Consumers have been paying higher prices for goods and services because of the hidden interchange fees built into the credit card system," said the Centre's Director, Chris Connolly.

"These reforms will replace an expensive hidden fee structure with a cheaper, transparent fee structure. It's a rare win for low income consumers who have borne the brunt of these hidden fees."

Mr Connolly congratulated the Reserve Bank for pursuing the reforms in the face of stiff opposition from banks and credit card companies. The three reforms are: a new objective standard for setting interchange fees (resulting in significantly lower merchant fees); the end of the "no surcharge rule"; and the opening up of the credit card system to new players.

"Consumers can look forward to interchange fees falling by 40% under the new standard. This will mean lower prices on all goods and services as around $360 million a year is 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 has exposed 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 consumers," said Mr Connolly. "We will now begin work on ensuring that the reforms are implemented quickly, and ensuring that the banks do not attempt to raise fees and charges elsewhere."

Contact Details: Chris Connolly, Financial Services Consumer Policy Centre, tel. 9385 1208 / 0414 938 942; Khaldoun Hajaj, Director of Research, mob. 0404 078 692 or Annabel Day, UNSW Public Affairs & Development, tel. 9385 3644.