Visa challenges RBA to slash hidden fees

Sydney (Agence France-Presse): Credit card issuer Visa International on Thursday launched a legal challenge against the Australian central bank's plans to slash hidden fees on credit card transactions.

The plans represent the first time a central bank has attempted to systematically regulate the card fees and analysts believe they could cost the credit card companies billions of dollars if adopted worldwide.

Visa's Australian vice president Gordon Wheaton said the Federal Court action would argue the Reserve Bank of Australia (RBA) had no power to regulate the credit card fees.

"We have no alternative but to try and protect our business, a very successful business, through the only avenue available to us, which is the court," Wheaton said.

Under the RBA's plans, credit card issuers will lose the power to set hidden "interchange" fees that banks charge each other then pass on to consumers for each credit card transaction.

Instead the fees will be set by an independent body and reviewed every three years, a move the RBA believes will immediately result in interchange fees falling from 0.95 percent to around 0.55 percent when the changes come into effect next year.

The plans would also increase competition by allowing non-bank companies such as supermarkets to issue credit cards and would allow retailers to set card fees, rather than banks.

Wheaton said the reforms would damage a business that was performing very well without regulatory interference.

The RBA said it was disappointed by Visa's actions and would vigorously defend the reforms.