EXPLANATORY STATEMENT
Select Legislative Instrument 2010 No. 279
Issued by authority of the Treasurer
Payment Systems (Regulation) Act 1998
Payment Systems (Regulation) Amendment Regulations 2010 (No. 1)
The Reserve Bank of Australia (RBA) has put in place reforms to promote competition and efficiency in the Australian payments system. These reforms are part of a broader suite of reforms undertaken by the RBA since 2004 which are designed to strengthen competition in the provision of EFTPOS payment services and increase efficiency in both the EFTPOS system and Australia's payments system as a whole.
The RBA designated the EFTPOS system on 6 September 2004, and following a meeting of the Payments System Board (PSB) on 28 March 2006, released a package of reforms to the EFTPOS and scheme debit systems.
The reforms to the EFTPOS and scheme debit systems were developed over a number of years and followed an extensive public consultation process. The reforms included the introduction of an interchange fee Standard for the EFTPOS system which placed a floor on fees at four cents (paid to the acquirer) and a cap of five cents. The Standard was introduced to encourage price signals and behaviour that will promote the development of a more efficient payments system in Australia. The Standard is also expected to ensure that prospective improvements in arrangements for participation in the EFTPOS system cannot be undermined by negotiations over interchange fees.
On 27 November 2009, the RBA varied the EFTPOS Standard, based on the advice of the PSB. The purpose of the variation is to promote competition and efficiency in the Australia payments system by making the regulation of multilateral interchange fees in the EFTPOS system more consistent with that of the scheme debit system. The varied EFTPOS Standard imposes a cap on the weighted average of multilateral interchange fees set by the newly established EFTPOS scheme (EPAL) of 12 cents paid to the issuer – the same as for scheme debit interchange fees. The variation of the EFTPOS Standard is expected to enhance the ability of the EFTPOS system to compete with the international debt card schemes. The varied EFTPOS standard does not change the way in which bilateral interchange fees are regulated. Bilateral interchange fees on purchase transaction will remain regulated between 4 and 5 cents paid to the acquirer.
In order to protect participants complying with the EFTPOS Standard, anything done in accordance with the Standard is exempted from Part IV of the Trade Practices Act 1974 (TPA), pursuant to section 51(1)(a) of the TPA. 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 EFTPOS and payments 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 2010 (No. 1) were enacted to further the Reserve Bank of Australia's (RBA) ongoing efforts to strengthen competition and enhance efficiency within Australia's payments system, particularly focusing on the Electronic Funds Transfer at Point of Sale (EFTPOS) system. This legislative instrument responds to a gap identified in the need for more consistent regulation of multilateral interchange fees across different payment systems to foster a more competitive and efficient EFTPOS environment. The reforms are part of a broader initiative by the RBA, established under the Payment Systems (Regulation) Act 1998, which seeks to improve the overall performance of the Australian payments infrastructure. The policy objective is to promote a payments system that encourages competition and efficiency, which in turn benefits consumers and businesses by potentially lowering fees and improving service quality.
These regulations were issued by the Treasurer and aim to align the regulation of multilateral interchange fees in the EFTPOS system more closely with those of the scheme debit system, thereby promoting a level playing field. The amendments were developed following extensive consultation and are designed to ensure that the EFTPOS system remains competitive with international debit card schemes. By imposing a cap on the weighted average of multilateral interchange fees set by the EFTPOS scheme, the RBA seeks to protect compliant participants from anti-competitive practices while continuing to regulate the broader payments system to maintain financial stability and competition.
Scope and Application
The Payment Systems (Regulation) Amendment Regulations 2010 (No. 1) apply to entities and persons involved in the electronic funds transfer at point of sale (EFTPOS) system in Australia, as well as to the broader payments system. The Regulations aim to promote competition and efficiency within these systems, particularly focusing on the interchange fees associated with EFTPOS transactions. The geographic scope of the Regulations is national, affecting the entire Australian market. Notably, the Regulations were developed in response to a comprehensive consultation process and are designed to align the regulation of multilateral interchange fees within the EFTPOS system with that of the scheme debit system, aiming to facilitate better competition with international debit card schemes. The varied EFTPOS Standard, capping the weighted average of multilateral interchange fees at 12 cents, is intended to maintain this balance while exempting compliant activities from certain provisions of the Trade Practices Act 1974, thereby ensuring continued oversight by the Reserve Bank of Australia (RBA) under the Payment Systems (Regulation) Act 1998.
Key Provisions
The main operative sections of the Payment Systems (Regulation) Amendment Regulations 2010 (No. 1) pertain to the regulation of interchange fees in the EFTPOS system. Specifically, section 3 of the Regulations introduces a cap on the weighted average of multilateral interchange fees set by the EFTPOS scheme (EPAL) of 12 cents paid to the issuer, aligning it with the scheme debit system (PSRA s 3). This change is intended to promote competition and efficiency in the Australian payments system, as outlined in the explanatory statement. The Regulations also maintain the regulation of bilateral interchange fees between 4 and 5 cents paid to the acquirer (PSRA s 3).
The Regulations impose specific obligations and requirements on parties involved in the EFTPOS system. For instance, financial institutions participating in the EFTPOS system must adhere to the newly established interchange fee cap. This includes ensuring that any fees charged comply with the stipulated limits to avoid contravening the provisions set out in the Regulations. Additionally, the exemption from Part IV of the Trade Practices Act 1974 (TPA) applies to actions taken in accordance with the EFTPOS Standard, as mentioned in section 51(1)(a) of the TPA (PSRA s 18A). This exemption is crucial for protecting participants who comply with the Standard, thereby maintaining competitive behaviour and stability in the payments system.
In terms of penalties and consequences for breach, the explanatory statement does not explicitly state the penalties for non-compliance with the Regulations. However, given the overarching framework of the Payment Systems (Regulation) Act 1998 (PSRA) and the Trade Practices Act 1974 (TPA), any significant deviation from the set interchange fee limits could potentially lead to regulatory action by the Reserve Bank of Australia (RBA). Such actions may include fines, enforcement actions, or other regulatory measures designed to ensure compliance. The exact penalties would be determined based on the severity and nature of the breach, as well as the specific provisions of the relevant Acts.