The Financial Regulator has been urged to investigate the Irish credit card market after a European Commission report strongly criticised operators in the sector throughout the EU for overcharging.
The report found fees to businesses accepting credit card payments and interest rates charged to consumers varied widely throughout the EU. It said the levies were pushing up prices by around 2.5 per cent EU-wide.
Competition Commissioner Neelie Kroes said legal action will be taken against companies found to have broken EU regulations.
"Banks are making too much profit," Ms Kroes said after a preliminary report found the sector was not operating on an EU-wide basis, creating discrepancies in charges from state to state.
"The payment cards industry in Europe remains national and some local players are preventing competition from developing," Ms Kroes added.
Fine Gael MEP Gay Mitchell said: "Given that this problem exists throughout the EU, the Irish Financial Regulator should now undertake a similar study in Ireland."
He said evidence of overcharging had emerged in the UK, where a study revealed credit card companies overcharging customers on default charges by up to €432 million annually.
The Irish Bankers Federation said credit and debit card fees in Ireland were "very competitive" but called for the removal of the €40 Government stamp duty charge.
It said Irish companies did not charge annual fees nor was there a charge for obtaining a card. The EU average annual fee was €14 and an annual issuance fee was €24.
While charges existed in other EU countries for debit cards again there was no charge in Ireland.
The IBF noted the Central Bank's first Quarterly Bulletinlast year said competition in the credit card sector had increased since 1999 and that margins had narrowed as a result.
A spokeswoman for the Financial Regulator welcomed any move to "bring transparency to the market" and said the report would be studied.
A survey of credit card fees is published every six months by the regulator. Its most recent one shows normal interest charges to customers range between 10.9 per cent and 17.9 per cent.
Banks in eight EU member states create joint marketing ventures offering retailers the same prices to accept purchases by card, instead of competing against each other.
Visa and Mastercard have already come up against the Commission over their fees, which the highest European anti-trust authority said broke competition rules.
A total of 23 billion credit card payments worth €1.35 trillion are made each year in the European Union.
Today's report is part of a wider investigation into competition in the banking retail sector as the push to create a single internal market for financial services in the EU continues.
In 2002, Visa, the world's largest credit card association, agreed to cut fees after the Commission investigated its business practices. Mastercard is embroiled in a similar case with the EU executive.
Additional reporting Reuters