OFT Steps Back Over Card Schemes

by Robin Pilgrim, LawAndTax-News.com, London

27 February 2007

The UK's Office of Fair Trading last week announced that it will not undertake further work on the access and governance arrangements of UK card schemes at the present time.

However, this does not affect the ongoing OFT investigations into MasterCard's and Visa's interchange fee arrangements.

Interchange fees are payments made between banks on virtually all purchases in the UK made using Visa and MasterCard cards. These are passed on to merchants and ultimately, in the OFT's view, to all consumers through higher prices.

The OFT is tackling both MasterCard's and Visa's current UK interchange fee arrangements, but after a decision announced by the Competition Appeal Tribunal, revealed that it would cease to pursue the credit card firms over historic interchange fee arrangements, leaving it to affected third parties to contest the lawfulness of the old arrangements, if they choose to, in private court actions.

Meanwhile, explaining the reasoning behind the move to reduce OFT scrutiny of card schemes, with the exception of the ongoing investigations, the Office explained last Thursday that:

"In December last year the Payment Systems Task Force, which was chaired by the OFT, met for the last time following the establishment of a new strategic governance body for the payments industry in the UK. The majority of the outstanding work of the Task Force was transferred to this new body, with the exception of access and governance arrangements of UK card schemes, which do not fall within its remit. The OFT undertook to consider the extent to which there was still further work to be done on the access and governance of card schemes."

It concluded:

"The governance of major card schemes operating in the UK (Visa, MasterCard and Maestro), is primarily at European and international level, and the European Commission's contribution to the SEPA project includes the access and governance arrangements of payment schemes. Additionally, considerable changes have been made to card schemes' governance arrangements, largely in line with previous Task Force recommendations."

"Therefore the OFT no longer feels that this is a priority area, and will not undertake further work on the access and governance arrangements of card schemes in the UK at this time."

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