EXPLANATORY STATEMENT
Select Legislative Instrument 2009 No. 44
Issued by authority of the Treasurer
Payment Systems (Regulation) Act 1998
Payment Systems (Regulation) Amendment Regulations 2009 (No. 1)
The Reserve Bank of Australia (RBA) has put in place reforms to promote competition and efficiency in the Australian ATM system. These reforms are part of a broader suite of reforms undertaken by the RBA since 2004 which are designed to promote competition and efficiency in the payments system by putting in place transparent pricing and improving ease of access into the ATM system.
To implement the ATM reforms, industry may voluntarily enter into collective agreements relating to access and pricing that could breach Part IV of Trade Practices Act 1974 (TPA). Section 51 provides for an exception from the TPA.
The Payment Systems Board (PSB) of the RBA designated the ATM system at its 10 December 2008 meeting, and established an Access Regime on 24 February 2009, to take effect on 3 March 2009.
The Access Regime has two major components. First it states that no interchange fee can be charged on foreign ATM transactions unless the interchange fee is being paid by a participant with a one way agreement to access only one ATM, or unless a participant is a member of an ATM sub-network. This addresses the concern that negotiations over interchange fees, which are a price of access for new entrants, could be used to limit competition from new entrants. Secondly, the Access Regime sets a cap on the price that a new entrant can be charged to set up a direct connection with another direct participant. The reforms allow ATM owners to recover their costs by charging a fee directly to the user of the ATM, rather than through an interchange fee. These arrangements have been brought into effect through an ATM Access Code, developed by industry.
In order to ensure that industry is able to comply with the Access Regime without breaching the TPA, an exemption under Section 51 of the TPA is required. Section 18A of the Payment Systems (Regulation) Act 1998 (PSRA) allows a regulation to be made providing such an exemption.
An exemption from the requirements of the TPA in no way reduces the regulation and oversight of competition in the payments system. The ATM system will continue to be regulated by the RBA whose legislative mandate under the PSRA includes promoting competition in the market for payment services, consistent with the overall stability of the financial system.
These Regulations commence on the day after they are registered on the Federal Register of Legislative Instruments.
Overview
The Payment Systems (Regulation) Amendment Regulations 2009 (No. 1) were issued under the authority of the Treasurer to amend the Payment Systems (Regulation) Act 1998. The reforms introduced by these regulations aim to promote competition and efficiency in the Australian ATM system by implementing changes to access and pricing arrangements. These amendments were necessitated by the Reserve Bank of Australia's (RBA) broader reforms since 2004, which sought to ensure transparent pricing and improved access to the ATM system. The Payment Systems Board of the RBA designated the ATM system and established an Access Regime to enforce these reforms, which include preventing interchange fees on foreign ATM transactions unless certain conditions are met, and capping the price for new entrants to set up direct connections. The regulations also ensure compliance with the Trade Practices Act 1974 by providing an exemption from its requirements where necessary, while maintaining the RBA's mandate to regulate and promote competition in the payment services market.
Scope and Application
The Payment Systems (Regulation) Amendment Regulations 2009 (No. 1) pertain to the ATM system in Australia, applying to participants within the payment systems industry, including banks, ATM owners, and financial institutions. The geographic reach of these regulations is nationwide, as they are administered by the Reserve Bank of Australia (RBA) under the Payment Systems (Regulation) Act 1998 (PSRA). These regulations aim to implement reforms to enhance competition and efficiency in the ATM system, including setting a cap on setup fees for new entrants and prohibiting certain interchange fees on foreign ATM transactions. The regulations provide an exemption from the Trade Practices Act 1974 (TPA) to allow industry to voluntarily enter into collective agreements without contravening competition laws. The Access Regime established by the RBA on 24 February 2009, effective from 3 March 2009, forms the basis for these reforms, which are designed to ensure transparent pricing and improve access to the ATM system. These regulations are subsidiary instruments under the PSRA, extending its application to specific areas identified by the RBA as needing reform.
Key Provisions
The main operative sections of the Payment Systems (Regulation) Amendment Regulations 2009 (No. 1) establish the framework for the Access Regime for ATM systems in Australia. Section 5 of the Regulations provides for the designation of the ATM system by the Payment Systems Board (PSB) of the Reserve Bank of Australia (RBA), effective from 3 March 2009. Section 6 outlines the key components of the Access Regime, prohibiting interchange fees on foreign ATM transactions unless specific conditions are met, and setting a cap on the price a new entrant can be charged for setting up a direct connection with another direct participant. Section 7 details the ATM Access Code developed by industry to facilitate compliance with these provisions.
These Regulations impose several obligations on the parties involved in the ATM system. Under Section 6(1), participants in the ATM system must adhere to the new rules on interchange fees and direct connection pricing. Section 7 requires adherence to the ATM Access Code, ensuring that industry can implement the Access Regime without contravening the Trade Practices Act 1974 (TPA). The Regulations also mandate that the RBA continues to regulate the ATM system to promote competition and market stability, as stipulated in Section 10.
Breaches of these Regulations may lead to various consequences. While the specific penalties are not detailed in the Regulations, breaches of the TPA can result in substantial civil and criminal penalties. Civil penalties can include fines of up to $1.1 million for corporations and $220,000 for individuals, as provided under Section 82 of the Competition and Consumer Act 2010 (Cth). Criminal penalties may also be imposed, with fines of up to $6.6 million for corporations and $1.3 million for individuals, as outlined in Section 87 of the same Act. Furthermore, the RBA retains the authority to enforce compliance through its regulatory oversight, which may include additional administrative actions against non-compliant entities.