Chris McCormack/cm160019

Govt attacks credit card rates by opening industry floodgate

LOWER credit card interest rates could become a reality under a proposal to increase competition in the sector by expanding the number of companies that can issue cards or process card transactions for retailers.

Currently only registered banks or specialist credit card institutions can issue credit cards or accept credit card transactions on behalf of retailers.

Federal Finance Minister Mathias Cormann said on Sunday the government's changes would encourage new participants, drive product innovation and encourage better use of technology.

He said the changes would also increase competition which would benefit both consumers and retailers.

"All new entrants will need to meet the same consumer credit regulations that currently apply to banks or specialist credit card institutions, such as obligations to ensure the responsible issuing of credit," he said.

"The new regime will include safeguards to ensure that any new entrants are financially sound institutions that do not add unacceptable risks to the financial system.

"This change strikes the right balance between stability and competition and aligns with recommendations from the Reserve Bank of Australia's review into Australia's Card Access Regime in March this year."

The changes are expected to come into effect early next year. - APN NEWSDESK.