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$2.6m credit card fee settlement will shake up retail transactions

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  • $2.6m credit card fee settlement will shake up retail transactions

    $2.6m credit card fee settlement will shake up retail transactions

    Mitchell Hall | Wednesday August 12 2009 - 02:32pm
    The Commerce Commission has settled out of court with Visa in a deal that will change the fees charged on all retail transactions in New Zealand.
    Visa has clearly figured it was on a hiding to nothing when it decided to pay the Commission $2.6 million towards its court costs, alongside offering a “pro-active solution” to the Commission’s charges that Visa had been breaching the restrictive trade practices provisions of the Commerce Act.
    The penalties for price-fixing are up to $10 million per breach, or either three times the commercial gain resulting from the breach, or 10% of a company’s turnover - whichever is higher, which makes Visa's settlement look like very small change in comparison.
    Visa – and all other major banks and credit card companies in New Zealand – clip the ticket on every card transaction usually to the tune of between 1%-5%, but merchants are prohibited from passing these charges on to customers, so they must average out the cost of that fee across all their sales.
    “This increases the cost of every item or service sold by businesses which accept Visa or MasterCard. All customers of those businesses bear that averaged fee, regardless of whether the customer pays by credit card, cash, EFTPOS or another payment method”, notes the Commission.
    Visa’s settlement with the Commission means that merchants will now be able to add surcharges to payments made by credit cards, along with being able to encourage customers to pay by other means.
    The banks issuing credit cards 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 that will be publicly available.
    The settlement also means you no longer have to be a bank to issue a credit card: non-bank organisations or companies who want to provide acquiring services to merchants are now allowed to join the Visa network as acquirers - if they meet the relevant criteria.
    Commerce Commission Chair Dr Mark Berry believes that the changes will improve competition between companies that provide credit card services to retailers in New Zealand over time, saying that, “The Commission considers that this increased transparency will assist retailers and customers in making decisions about their payment choices.”
    The Commission is continuing its claims against MasterCard, The Warehouse Financial Services Limited in relation to MasterCard, ANZ National Bank, Bank of New Zealand, Westpac, ASB Bank, Kiwibank and TSB Bank in relation to interchange fees at the Auckland High Court in October.
    The 900,000 New Zealand Mastercards and 2.1 million Visa cards in circulation completed worldwide transactions totalling $19 billion in 2004.
    http://www.nbr.co.nz/article/26m-cre...actions-107378
    "There's one way to find out if a man is honest-ask him. If he says 'yes,' you know he is a crook." Groucho Marx

  • #2
    Originally posted by muppet View Post
    Visa’s settlement with the Commission means that merchants will now be able to add surcharges to payments made by credit cards, along with being able to encourage customers to pay by other means.
    Travel agents and taxis have been doing this for years.

    I think foodtown wanted to start charging and visa said they couldn't under the terms of their contract. I think that is what started this whole thing.

    Will be interesting to see who starts charging as I may have to change my visa only spending habit.

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    • #3
      I find it really annoying to be asked to pay extra.
      The retailer is making savings by effectively having your money in their bank account right at the point of sale. No cash holding costs.

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      • #4
        Originally posted by flyernzl View Post
        I find it really annoying to be asked to pay extra.
        The retailer is making savings by effectively having your money in their bank account right at the point of sale. No cash holding costs.
        I am on the other side of that argument, why should I as a cash purchaser have to pay extra to cover the costs created by those who buy with credit cards? This is a wonderful and timely change.........user pays at its best!

        As I understand it the change doesn't apply to cash card transactions, rather credit card transactions.
        The mission of any business enterprise should include the aim to develop economic conditions rather than simply react to them.

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