Finance Minister Yuval Steinitz. Price controls are not the answer.
Finance Minister Yuval Steinitz. Price controls are not the answer. Photo by Michal Patel
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Finance Minister Yuval Steinitz is intent on pushing through an amendment designed to block a possible loophole in a new law aimed at opening Israel's credit-card clearing market to competition.

The so-called Isracard Law, which goes into effect on May 15, was created in order to reduce the clearing fees that issuers of credit cards - such as Isracard, Leumi Card and Cal - charge businesses for clearing customer payments by guaranteeing a more open market.

The law requires major issuers, such as Isracard, to allow other issuers to clear its cards. Isracard issues 17% of Israel's credit cards. It clears the transactions of its competitors, but does not permit them to clear its own cards. That gives it a competitive advantage. Most businesses opt to go with Isracard as a clearing company, even if it charges a higher commission.

Isracard points out that the bill prohibits card issuers from preventing other clearing agencies from clearing their cards "on unreasonable grounds," without defining "unreasonable grounds." It is demanding that other issuers pay it royalty fees, on top of the maximum clearing fees stipulated by the Antitrust Tribunal, for use of its brand name.

"The concern is that Isracard is demanding royalty payments from its competitors in order to increase their expenses, so they'll be incapable of competing against it in offering lower clearing fees to business owners," a senior banker says. "In this kind of situation, competition will not increase, new players will not enter the clearing market and the royalties that Isracard is demanding will help it to tighten its hold on the sector."

Steinitz is expected to submit an amendment today to the Isracard Law, specifying that any demand for payment from a clearing agency that exceeds the maximum rate set by the Antitrust Tribunal constitutes an unreasonable demand.

The finance minister will submit a draft law memorandum of the bill today to the government ministries for comments. During the Knesset election recess, he will submit it to the Knesset plenum. He hopes to get it through all three legislative votes during the recess, but at the very least expects to push it through a first reading, which would permit the Knesset to take it up again when it reconvenes after the September election.