Visa International has initiated legal action against the Reserve Bank of Australia over recently-announced credit card regulations, which it describes as "poorly constructed and potentially damaging".
The action, filed with the Federal Court of Australia, challenges the RBA's "misconceived regulatory intervention" in Visa's credit card business. Specifically, the card operator is asking the Court to assess the validity of the RBA’s designation of the Visa credit card system in Australia; the RBA’s regime for access to Visa scheme membership; and the standards for setting interchange fees between scheme members and merchants' capacity to surcharge on credit card purchases.
Gordon Wheaton, Visa’s executive vice-president for Australia and New Zealand, says Visa is not asking the Court to rule on the specific economic or business impact outcomes from the RBA's regulations.
"We are arguing that the RBA has acted beyond the powers conferred on it under the Payments Systems (Regulation) Act. We are asking the Court to declare invalid the RBA's designation of Visa and each of the regulatory measures it has determined," says Wheaton.
The Reserve Bank's decision to mandate a decrease in interchange fees invoked howls of protests from card schemes and banks when they were unveiled earlier this month. Visa is so far alone in lodging a formal challenge to the proposed rule changes, but its actions are certain to have the implicit support of member banks.
Visa believes the RBA has failed to assess the financial costs and impacts of its measures on current participants. This alleged "lack of a rational economic framework and analysis" means the RBA cannot be confident that its regulations will not actually decrease efficiency in the payments system and reduce competition in the market for payment services, argues Visa.