The Bank of Israel Banking Supervision Department will receive oversight authority on the credit card market. This will give the department the authority to supervise credit card companies, including clearance fees, concludes a committee headed by Accountant General Dr. Yaron Zelekha, which has been operating since August 2005.
The committee examined market failures, which prevent competition in the clearing of credit cards. The committee sought to expedite the opening of the credit card clearing market to cross clearing of all brands by all companies. Committee economic advisor David Boaz was a former Ministry of Finance budget director.
The Zelekha committee recommends forcing Isracard Ltd. to allow transactions on its credit card to be cross cleared by other companies, and requiring reciprocal clearing by the three companies, Isracard, Leumi Card Ltd. and Israel Credit Cards-Cal Ltd. (ICC-Cal) (Visa), as well as with any new credit card company entering the market. The committee also recommends encouraging new companies to enter the issuing and clearing of credit cards market.
Zelekha believes that the recommendations will create competition among the credit card companies for clearing of credit card transactions by businesses and that commissions collected from businesses will likely fall.
The committee’s recommendations submitted to Minister of Finance Abraham Hirchson today have been translated into draft legislation to be amended to the debit card clearing chapter in the Banking Law. The Ministry of Finance has said in the past that the minister had sole authority to decide on legislative matters.
A senior credit card executive said in response, “It’s unacceptable that there are two regulatory authorities, and two agencies supervising the same system. This is utterly unreasonable. We’ve reached an agreement with the Antitrust Authority, and now everything is being reopened.”
In October 2006, Antitrust Authority director general Ronit Kan and the three credit card companies and the banks reached an agreement on opening the credit card clearing market, after long negotiations. Zelekha’s proposed bill contradicts the agreement and is liable to cause its abrogation.
Published by Globes [online], Israel business news - www.globes.co.il - on February 26, 2007
© Copyright of Globes Publisher Itonut (1983) Ltd. 2007