Credit card surcharge now OK, says regulator

Using credit cards may cost extra, now that Visa has settled a price-fixing case with the Commerce Commission.

Credit card giant Visa has settled out of court with the Commerce Commission over price fixing claims, but the result means merchants can now start imposing levies on shoppers using credit cards.

Visa has agreed to a series of moves designed to improve competition and disclosure and will pay out $2.6 million towards the commission's costs in pursuing the issue.

The commission will drop its High Court action against Visa where it said that its so-called "interchange fee" rules breached the restrictive trade practices provisions of the Commerce Act.

Court action is also under way against a range of banks and other credit card companies.

Credit card issuers will now be able to individually set the interchange rates that will apply to transactions using their credit cards, subject to maximum rates determined by Visa. These rates will be publicly available.

But merchants will no longer be prevented from applying surcharges to payments made by credit cards or by specific types of credit cards. They will also be able to encourage customers to pay by other means.

Visa will open its network to non-banks if they meet certain financial and prudential criteria.

Commission chairman Mark Berry welcomed Visa's "initiative in approaching the commission" and said the agreed changes would improve competition between companies that provide credit card services to retailers in New Zealand.

The commission also has claims against ANZ National Bank , Bank of New Zealand, Westpac New Zealand , ASB Bank , Kiwibank and TSB Bank in relation to interchange fees in the Visa scheme, which continue, as does its claim against those banks, MasterCard and The Warehouse Financial Services in relation to the MasterCard rules. These are expected to be heard at the High Court in Auckland in October this year.

Each time a Visa or Mastercard cardholder makes a purchase, the retailer pays a fee to their own bank as part of the payment authorisation process. That fee is comprised mainly of the interchange fee, which is paid to the cardholder's bank.

The retailer is not allowed to recover the fee from the cardholder and therefore all customers bear a cost in higher prices regardless of how they pay.

In 2003, the Reserve Bank of Australia moved to regulate the level of interchange fees, reducing the fees over time from 0.95 per cent of transaction value to less than 0.5 per cent.

Public and private competition enforcement actions have also been brought in respect of interchange fee arrangements in other jurisdictions, including the US and the UK.

- NZPA