Payment Systems (Regulation) Regulations 2003 2003 No. 110
EXPLANATORY STATEMENT
Statutory Rules 2003 No. 110
Issued by the Treasurer
Payment Systems (Regulation) Act 1998
Payment Systems (Regulation) Regulations 2003
Section 32 of the Payment Systems (Regulation) Act 1998 (the Act) provides that the Governor-General may make regulations prescribing matters required or permitted by the Act to be prescribed, or necessary or convenient to be prescribed for carrying out or giving effect to the Act.
The Act provides for the regulation of payment systems and purchased payment facilities. Subsection 11(1) of the Act provides that the Reserve Bank of Australia (RBA) has the power to designate payment systems if it considers that it is in the public interest to do so.
Subsection 18(1) of the Act provides that the RBA may determine standards to be complied with by participants in a designated payments system. On 26 August 2002, the RBA determined a standard on the setting of wholesale "interchange" fees for participants in credit card schemes. The standard is expressed to come into force on 1 July 2003. The RBA designated three participants for the purposes of the standard on 12 April 2001- Visa, MasterCard and Bankcard. Interchange fees are charged between financial institutions in order to provide credit card services.
However, if participants in the designated schemes comply with the standard on the setting and charging of interchange fees, they risk contravening Part IV of the Trade Practices Act 1974 (TPA).
Part IV of the TPA describes and prohibits various restrictive trade practices. Subparagraph 51(1)(a)(ii) of the TPA provides that anything specified in, and specifically authorised by an Act or regulations made under an Act, is exempted from the operation of Part IV.
The purpose of the regulation is to eliminate the overlap between the TPA and the standard by specifically authorising, for the purpose of subparagraph 51(1)(a)(ii) of the TPA, the setting and charging of credit card interchange fees by participants of these schemes in accordance with the standard.
The effect is to exempt such conduct from Part IV of the TPA.
Details of the Regulations are set out in the Attachment.
The Office of Regulation Review has advised that no Regulation Impact Statement is required in relation to the Regulations as one was prepared for the package of reforms in relation to credit cards released by the RBA on 27 August 2002.
The regulations will commence on 1 July 2003.
ATTACHMENT
Summary of Regulations: Payment Systems (Regulation) Regulations 2003
Regulation 1: The title of the regulations is the Payment Systems (Regulation) Regulations 2003.
Regulation 2: The regulations will commence on 1 July 2003. This is immediately after the Reserve Bank of Australia's (RBA) Standard No. 1, entitled the Setting of Wholesale ("Interchange") Fees, comes into force, on 1 July 2003.
Regulation 3: The regulation provides two definitions. The first is the definition of the RBA Standard No. 1, entitled the Setting of Wholesale ("Interchange") Fees. The second definition limits references to Standard No. 1 to the standard in existence immediately before the regulations commenced.
Regulation 4: This regulation authorises conduct for the setting and charging of credit card interchange fees for the purposes of sub-paragraph 51(1)(a)(ii) of the Trade Practices Act 1974 (TPA). It applies to conduct of participants in credit card schemes designated by the Reserve Bank on 12 April 2001 in compliance with Standard No. l . This authorisation ensures that such conduct is exempt from Part IV of the Trade Practices Act 1974.
Overview
The Payment Systems (Regulation) Regulations 2003, enacted in 2003, address the legislative gap identified in the Payment Systems (Regulation) Act 1998 by providing a framework for the regulation of payment systems and purchased payment facilities. This regulation was issued by the Treasurer and aims to ensure the smooth operation of designated payment systems while preventing any conflict with the Trade Practices Act 1974. Specifically, the regulations seek to exempt the setting and charging of credit card interchange fees by designated participants from the restrictive trade practices outlined in Part IV of the TPA, thereby allowing compliance with the Reserve Bank of Australia's standards without legal impediments. The regulations will take effect on 1 July 2003, aligning with the commencement date of the RBA's Standard No. 1 on interchange fees.
Scope and Application
The Payment Systems (Regulation) Regulations 2003 apply to conduct related to the setting and charging of credit card interchange fees by participants in credit card schemes designated by the Reserve Bank of Australia (RBA) in compliance with the RBA's Standard No. 1, which came into force on 1 July 2003. This includes the specific schemes of Visa, MasterCard, and Bankcard as designated by the RBA on 12 April 2001. The primary purpose of these regulations is to exempt the authorised conduct from the restrictive trade practices provisions of Part IV of the Trade Practices Act 1974, ensuring that compliance with the RBA's interchange fee standard does not constitute a contravention of the TPA. The regulations provide a clear definition of the RBA's Standard No. 1 and limit references to the standard to its form immediately before the regulations commenced. The scope of the regulations is confined to the conduct of participants in the designated credit card schemes and do not extend to other payment systems or entities outside these specific schemes.
Key Provisions
The Payment Systems (Regulation) Regulations 2003 (the Regulations) detail the requirements and authorisations under the Payment Systems (Regulation) Act 1998 (the Act). Regulation 1 states that the title of these Regulations is the Payment Systems (Regulation) Regulations 2003, providing the formal name and identification of the Regulations. Regulation 2 specifies that these Regulations will commence on 1 July 2003, aligning with the implementation date of the Reserve Bank of Australia's (RBA) Standard No. 1 on the setting of wholesale interchange fees. Regulation 3 contains definitions that are critical for interpreting the Regulations. It defines "RBA Standard No. 1" as the standard on the setting of wholesale interchange fees and limits references to this standard to its form immediately before the Regulations commenced, ensuring clarity and consistency in the application of the standard.
The Regulations impose specific obligations on participants in credit card schemes designated by the RBA. Regulation 4 authorises the setting and charging of credit card interchange fees by participants in designated credit card schemes in compliance with RBA Standard No. 1. This authorisation is crucial as it exempts such conduct from Part IV of the Trade Practices Act 1974 (TPA), which prohibits restrictive trade practices. By complying with RBA Standard No. 1, participants in designated credit card schemes can set and charge interchange fees without contravening the TPA, provided they adhere to the standards set by the RBA.
The Regulations also address potential legal implications and compliance requirements. Participants in the designated credit card schemes must ensure that their conduct in setting and charging interchange fees is compliant with RBA Standard No. 1 to benefit from the exemption under the TPA. Failure to comply with the standard could result in the conduct being subject to the restrictions and prohibitions of Part IV of the TPA, potentially leading to legal consequences. The Regulations aim to provide a clear framework for participants to operate within the bounds of the law while facilitating efficient payment systems.
Regarding penalties and consequences, the Regulations themselves do not specify any penalties for non-compliance. However, non-compliance with RBA Standard No. 1 could result in legal action under the TPA, which provides for various penalties, including fines and imprisonment. The maximum penalties under the TPA for breaches of restrictive trade practices can be significant, reflecting the importance of compliance with these standards. Participants in designated credit card schemes are therefore advised to ensure strict adherence to the RBA Standard No. 1 to avoid any legal repercussions.