Sydney, 10 December, 2008: The Australian Bankers’ Association (ABA) welcomes the start of the education campaign explaining how ATM direct charging will change the way consumers pay for ‘foreign’ ATM transactions. This change commences 3 March 2009.
What is a ‘foreign’ ATM transaction?
There are two broad types of ATM transactions – (a) the transaction where the customer uses an ATM owned by their own bank, and (b) the transaction where the customer uses the ATM owned by another institution1.
Next year’s changes affect (b) transactions – those where a bank customer uses the ATM owned by another institution. The jargon term to describe this ATM transaction is ‘foreign ATM transaction’.
Currently, when a bank customer makes a ‘foreign ATM transaction’, the customer typically pays a foreign ATM transaction fee. This fee covers a charge from the ATM owner, a charge from your financial institution or card issuer for processing the transaction and other costs. This fee is recorded on the customer’s monthly account statement. The fee is charged by the customer’s own bank, the ATM owner has no capacity to charge the customer directly.
However, from March next year the ATM owner will be able to directly charge the customer. The customer’s bank, building society, credit union and other card issuers (for example, American Express) that provide the card used for the foreign ATM transaction, and manages the customer’s account, may also charge a fee or continue to charge a fee.
How much will these fees be?
The fees charged by both the ATM owner and customer’s bank will be determined independently by the institutions. There is no regulation of these fees.
What consumer protections will there be?
Under the new rules, the customer’s bank cannot limit what the ATM owner charges the customer, so the fee may vary between ATMs.
However, under the rules, the ATM owner must disclose on the ATM screen the direct charge amount. If the customer decides the fee is too high, the customer can cancel the transaction at no cost.
Why are these reforms being introduced?
ATM direct charging is an industry initiative undertaken in response to the Reserve Bank’s demands that ATM reform principles be voluntarily implemented. While the Reserve Bank showed tolerance in the timing of implementation, it was always made clear that failure to voluntarily implement would result in regulation. Direct charging at ATMs starts on 3 March, 2009.
What are the Trade Practices implications of these reforms?
One of the technical aspects of these reforms is that it involves an agreement to set the ATM interchange fee to zero.
Because the interchange fee is deemed a price, any multilateral agreement to change this fee might technically breach the Trade Practices Act (TPA). We say ‘technical’ because competition law is traditionally more concerned with agreements that increase prices, not decrease them to zero.
So, in order to facilitate the reforms without risking breach of the TPA, the Reserve Bank has agreed to use its powers under the Payments Systems Regulation Act 1998 to enable the agreement to take effect.
More details on the education campaign
The education campaign is being coordinated by the Australian Payments Clearing Association (APCA). Banks, credit unions, building societies and independent deployers of ATMs have been involved in developing this education campaign.
David Bell, Chief Executive of the ABA, said: “The ABA and its member banks will be working hard to ensure ATM users understand the changes before March next year.”
There are around 26 000 ATMs in Australia and banks own around half of those – (11, 200 – 43%). Other providers own the rest which include credit unions, building societies and independent deployers who supply cash machines to service stations, pubs, clubs, casinos and other locations.
Read an ABA fact sheet on the ATM reforms - ‘Frequently Asked Questions’.
Visit APCA for a consumer information brochure.
For information about payment systems reforms visit the Reserve Bank website.
For further information:
Heather Wellard,
ABA PR
Phone: 02 8298 0411
Mobile: 0409 830 439
ENDS
[1] There is no neat way to describe all participants in the ATM market. Those companies which own ATMs include banks, building societies, credit unions and others. The others are independent companies sometimes described as independent deployers of ATMs or third party ATM deployers. These machines are often found in service stations, pubs and clubs, are not owned by financial institutions and so do not carry the branding of a financial institution.