Treasury has released an Exposure Draft Banking Amendment (Credit Card) Regulation 2014 for consultation.
The exposure draft regulation amends the Banking Regulations 1966 (the Regulations) to allow non authorised-deposit-taking institutions (ADIs) to become credit card issuers (institutions that issue cards to customers) and card acquirers (institutions that accept payment by card on behalf of merchants) in the Visa and MasterCard credit card schemes.
Currently Regulation 4 of the Regulations provides that credit card acquiring and issuing is ‘banking business’, which has the effect that members of approved schemes (MasterCard and Visa) have to be ADIs and triggers supervisory requirements of the Australian Prudential Regulation Authority..
In 2004, the eligibility for membership of the MasterCard and Visa credit card systems was broadened by creating a new class of ADIs called specialist credit card institutions (SCCIs). SCCIs can engage in credit card issuing or acquiring, but not other banking business.
The exposure draft regulation will repeal Regulation 4 and makes a number of consequential amendments to the Regulations as a result of the repeal of Regulation 4 including the repeal of the SCCI Framework.
The card schemes will be responsible for determining which entities may become card issuers or acquirers under their schemes, subject to a risk management framework imposed by the Reserve Bank of Australia .
All new entrants will need to comply with the National Consumer Credit Protection Act 2009.
The changes take effect on 1 January 2015.
Implementation of the new regulatory framework will require the Payments System Board of the RBA to vary the Credit Card Access Regimes to provide for reporting requirements and disclosure of eligibility and assessment criteria for Scheme membership.
The Australian Payments Clearing Association will also need to vary related Bulk Electronic Clearing System rules to allow certain non-ADIs to continue to participate in the system after the removal of the SCCI framework.
