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Interchange fees investigation halted by UK regulator

The UK's main competition regulator has halted its long running investigations into whether Visa and MasterCard's interchange fee charges, which apply to payment card transactions, breached competition rules.

The Competition and Markets Authority (CMA) had been investigating whether agreements reached on the level of interchange fees charged by Visa and MasterCard for credit and debit card transactions breached UK competition laws.

It had been expected to announce whether or not it would begin formal proceedings against the businesses, but the CMA has said that it will halt its investigation for now.

The CMA said it would review how new EU rules on interchange fees, expected to come into force "in the coming months", impact on consumers before determining whether to continue with its investigations, which it said would remain open during this time.

"The decision has been reached in light of the European Commission’s proposed interchange fees regulation, which is expected to cap MasterCard’s and Visa’s fees and ensure they are fair and transparent," the CMA said. "The regulation, which is currently being debated in the Council of [Ministers], is likely to be implemented in the coming months and will benefit consumers and retailers by dealing with the harm which, it is suspected, is caused by current levels of interchange fees."

"The Competition and Markets Authority’s (CMA) investigations remain open and, if the CMA were to consider that the interchange fees regulation will not address the suspected harm as expected, the authority would look again at continuing proactively with the investigations," it said.

Interchange fees are the charges imposed for the cost of processing of credit and debit card payment transactions. 'Acquiring' banks which collect card payments on behalf of retailers, for which they charge a merchant service charge (MSC), must pay MIFs to 'issuing' banks that issue the relevant payment card to the customer. The cost of MIFs is built into the MSC.

Earlier this year, the European Parliament voted in favour of proposals which would cap interchange fees at 0.3% of credit card transaction values and the lower of 0.2%, or €0.07, for debit card transactions. The caps would apply to both EU cross-border transactions as well as domestic transactions within EU countries. Third party online payment providers would also have to disclose the actual cost of processing payments on request.

The proposed interchange fees regulation must, however, also receive the support of the Council of Ministers before it can become law. The CMA said the fee caps are expected to become effective from some time next year.

For UK payments, Visa currently applies a typical interchange fee charge of 8p per debit card transaction and a 0.77% charge on consumer credit card transaction values, the CMA said.

The regulator said MasterCard generally charges between 7p and 11p to process payments made using its MasterCard and Maestro debit cards in the UK and applies a fee of 0.8% or between 1.05% to 1.5% on credit card transaction values, depending on whether the transactions are made using its 'standard' or 'premium' cards.

However, the CMA said that MasterCard had agreed to take steps to reduce the fees it currently charges.

"The CMA is pleased to note that MasterCard has decided: to reduce the interchange fees applicable to its ‘premium’ cards down to the level of its ‘standard’ credit card fees on or before 1 April 2015, regardless of whether the interchange fees regulation is adopted, and once the interchange fees regulation enters into force, to implement graduated reductions of its consumer credit interchange rates ahead of the caps that are laid down in the regulation taking effect," the CMA said.

In September, the Court of Justice of the EU (CJEU) upheld an earlier ruling by the EU's General Court which found that interchange fees previously set by MasterCard had "restrictive effects on competition".

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