SYDNEY, Australia -Australian merchants are threatening to reject VISA debit cards if the Reserve Bank of Australia (RBA) eliminates their "honour all cards"(HAC) rule. "This is potentially very bad news for the 1.2 million credit union members who are VISA Debit cardholders," said CUSCAL's Head of Public Affairs, Louise Petschler. About 3.8 million debit cards are issued by Australian financial institutions. CUSCAL is the main industry body for Australia's 179 credit unions. "Credit union VISA debit cards are used in Electronic Funds Transfer at Point of Sales (EFTPOS) and ATM machines. The EFTPOS system is comprised of a "spaghetti network of crisscrossing bilateral connections – it is not a hub and spoke network with a central operator," CUSCAL's Luke Lawlor said. "CUSCAL has bilateral EFTPOS interchange agreements with various participants on behalf of credit unions. Terminals in stores are owned by `acquirer' banks or big merchants(supermarket chains and oil companies)." EFTPOS terminals operate like ATMs in the sense that they are PIN authorized and cardholders may ask for cash-out with a purchase. The merchants' threat is just another scrimmage in the long battle on the use of credit and debit cards. "The RBA has confirmed that credit card reform has increased fees for cardholders while delivering a $430 million bonus to retailers," Petschler said. RBA's plans were set back in May when The Australian Competition Tribunal overturned a plan to authorize an agreement on debit card interchange fees. Interchange fees are one of the major issues of the debate. "We are in substantial agreement with RBA on the need for a distinct VISA Debit interchange fee and for VISA Debit to be distinguished from VISA Credit at the point of sale," said Petschler. "Our chief concerns in the reform process are to protect the Honour All Cards (HAC) Rule..Cardholders are long overdue to receive some benefit from the RBA's payments reforms. So far all the benefits have gone to retailers. Maintaining the HAC rule is important to ensure that big retailers are not able to dictate to customers what cards they carry in their wallets." Australian VISA debit cardholders can either use the popular card to debit their own accounts or trigger a line of credit. When the RBA tried to reduce exchange fees last February, VISA International said it would reduce its interbank fees on its debit cards to sidestep RBA regulation. It was too little too late and the regulations were issued. In May the Australian Competition Tribunal overturned an Australian Competition plan and Consumer Commission overturned the RBA's plan to authorise an agreement on debit card interchange fees. CUSCAL is currently working with the RBA on developing debit card standards. -

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