Overview

The Payment Systems (Regulation) Act 1998 was enacted by the Australian Parliament to provide a legislative framework for the regulation of payment systems in Australia. This legislation aims to address issues related to payment system reliability, efficiency, and consumer protection. The Act empowers the Reserve Bank of Australia to set standards for payment systems, including interchange fees, which are the fees paid between banks when a payment is made using a credit or debit card. The 2016 Standard, as amended by the minor technical variation in 2017, was introduced to establish benchmarks for interchange fees in designated credit card schemes and to ensure these fees are set reasonably to protect both consumers and issuers. The variation in 2017 was made to alleviate potential compliance costs for scheme participants by extending the time frame for resetting interchange rates when benchmarks are exceeded.

Scope and Application

The Payment Systems (Regulation) Act 1998 applies to entities involved in payment systems in Australia, particularly those designated credit card schemes that process transactions between card issuers, acquirers, merchants, and consumers. This Act provides the Reserve Bank of Australia with the authority to regulate payment systems, including setting standards and monitoring compliance to ensure efficient, fair, and secure payment operations. The Act's jurisdiction extends across the Commonwealth of Australia, impacting all entities and individuals engaged in the designated payment systems. While the Act generally allows for extensive regulation, it does not apply to payment systems that are not designated under the Act, and certain exclusions or exemptions may apply depending on specific provisions and subordinate instruments. The Act also permits the Reserve Bank to implement and modify standards through subordinate legislation, which can extend or restrict its application as necessary. The variation of Standard No. 1 of 2016, concerning interchange fees, is an example of this regulatory flexibility, aimed at adjusting compliance timelines to mitigate potential costs for scheme participants.

Key Provisions

The main operative sections of the Payment Systems (Regulation) Act 1998 (the Act) relevant to this instrument include sections 18(5)(b), which allows the Reserve Bank of Australia to make minor technical variations to certain standards without the need for formal consultation, and section 28, which generally requires consultation under the Act. The Act also encompasses the process by which the Reserve Bank can set standards and how these standards can be varied. The specific section that pertains to the setting and variation of interchange fees is the one that authorises the Reserve Bank to set the benchmark for interchange fees and to make technical adjustments to these benchmarks without formal consultation. Under this Act, the Reserve Bank of Australia has a responsibility to oversee the payment systems in Australia, including credit card interchange fees. The Bank is tasked with setting benchmarks for these fees and ensuring that the designated credit card schemes comply with these benchmarks. The Bank must also ensure that any variations to these standards are communicated appropriately to the relevant parties. In this instance, the Bank has determined that a minor technical variation to the interchange fee reset period is appropriate and has made this variation without the need for formal consultation as permitted by section 18(5)(b) of the Act. The variation made by the Reserve Bank extends the time period for schemes to reset their interchange rates or amounts from 60 days to two months and one day. This change is designed to reduce compliance costs for scheme participants. The Bank has informally consulted with the designated credit card schemes and received their support for this minor technical change. This informal consultation process is permissible under section 18(5)(b) of the Act, which allows for such variations without formal consultation if the Bank considers them to be minor technical in nature. There are no specific offences, penalties, or civil/criminal consequences outlined in the Act for non-compliance with the interchange fee standards or their variations. However, failure to comply with the standards set by the Reserve Bank could potentially lead to regulatory scrutiny or other enforcement actions by the Bank. The Act empowers the Reserve Bank to take appropriate action to ensure compliance with the standards, although the specifics of such actions are not detailed within the Act itself.