Defined Terms and Documents       

Eligible Persistent Revolver Plaintiffs Seek Compensatory Damages From RBA And ASIC:

(i)         Condoning some Credit Card Issuers engaging in Numeracy And Literacy Targeting; and

(ii)        Not drawing upon the Extensive Powers and Responsibilities of the RBA to All Australians vested in the RBA's Charter and ASIC’s compulsory information gathering powers to redress (i) above

Below is an extract from 'Overview of Financial Services Post-Deregulation':

"Interest-rate ceilings on deposit accounts restricted the banks’ ability to attract funds particularly during the 1970s when inflation was rampant.  In the June quarter of 1975, inflation rose to 16.9% pa. At the same time, interest payable on amounts held in savings accounts offered by savings banks, for example, was restricted to 3.75% (by RBA regulation) from 1969 to 1980 (Foster, 1996).  In contrast, the interest rates offered by non-bank financial institutions (NBFIs) were not controlled and they were able to pay around 10% on passbook accounts."

"Banks in 1980 still operated in a highly regulated environment which was an artefact of previous economic and social conditions. Indeed, an extensive collection of controls remained from regulation introduced under the National Security Regulations in 1941."

Between 1960 and 1980 the RBA took a pro-active role in regulating commercial bank interest rates.  The purpose of regulation (until 1980) was "......... to achieve monetary policy, public sector financing and sectoral assistance objectives.....". 

By regulation, the RBA fixed the maximum interest rate that Australian banks could pay on passbook savings account at 3.75% from 1969 until 1980**.

**    The Campbell Committee was established in 1979 and reported in 1981.  The recommendations of the inquiry were targeted at ..... the abolition of direct interest rate and portfolio controls on financial institutions.

Interest rate ceilings on trading bank and savings bank deposits were dismantled from 1980; some limits on minimum and maximum terms on fixed deposits remained.

"Prior to 1985 the maximum interest rate that could be charged on credit cards had been set at 18% per annum by the Reserve Bank of Australia.  In April 1985, this rate was deregulated." (bottom of page 7)

For a full account of the historical background to deregulation and the deregulatory measures which were implemented during the 1980s see A Pocket full of Change, Banking and Deregulation, House of Representatives Standing Committee on Finance and Public Administration, November 1991, chapter 2; and Fast Money 3, the Financial Markets in Australia , Edna Carew page 1 - 30.

Crucially, pursuant to the RBA Charter, the RBA has held the authority to regulate -

(i)         the maximum interest rate charged on Purchases and Cash Advances, instead of Credit Card Issuers charging over 8% higher than if eligible level 1 or level 2 Australian had taken out an Unsecured Personal Loan provided those eligible level 1 or level 2 Australian adhere to the published 'Repayment Schedule' - explained in Unsecured Personal Loan; 

(ii)        that upon reaching 18 year's of age each Australian seeking their initial Credit Card be restricted to a Charge Card for the initial 12 months in order to establish a pattern of repaying all Purchases and Cash Advances 'in toto' each month;

(iii)       new 'transaction activity fees' on Purchases and Cash Advances so that the "User Pays Principle" applies, whereby all Credit Cardholders make a contribution towards Credit Card Issuers' costs, instead of the present practice of over 50% of all Credit Cardholders, known as ‘transactors’, .... paying outstanding balances in full on or before the time the minimum monthly repayments fall due and thus do not incur interest rate or penalty charges, yet enjoying a 31 days Interest Free Period paid for by the ‘Revolvers’, who make up the other category of credit card user (and who account for the majority of total outstanding balances on credit cards), who pay the minimum monthly repayments or some larger fraction of the outstanding balance and are exposed to the typically high interest rates levied on the unpaid amount; and

(iv)       that each Credit Card Issuer prominently note 'Primary Information' on the opening page of each Credit Card Product advertisement thereby desisting the Labyrinth of ‘Concealed Spiders’.

The Reserve Bank brought credit card schemes in Australia under its regulatory oversight on 12 April 2001.  However, the PSB "standards will (CONVENIENTLY) not cover the setting of credit card fees and charges to cardholders and merchants, or interest rates on credit card borrowings".

Below is an extract from Chapter Five: Philosophy of Financial Regulation of the Wallis Report on the Australian Financial System dated 1996 - '97: Summary and Critique:

"Regulation of all markets for goods and services can be categorised according to three broad purposes. First, regulation is to help ensure that markets work efficiently and competitively, and thus to overcome sources of market failure. Second, regulation can prescribe particular standards or qualities of service, especially where the consumption of goods and services carries risks, so that safety is a focus of concern. Third, regulation can help achieve social objectives such as, for example, 'community service obligations' which typically take the form of price controls."

Even though the Wallis Inquiry recognised that "..... regulation can help achieve social objectives such as, for example, 'community service obligations' which typically take the form of price controls.", the RBA never sought to implement a substantial inquiry into the effects on consumers of the deregulation of credit card interest rates, even though one of the Four Pillars considered it meritworthy. 

Below is a quotation from Westpac's submission to the Wallis Inquiry, submitted by former CEO, Bob Joss.  The Writer's investigations suggest that the Wallis Inquiry did not adopt Westpac's prudent recommendation in either its Discussion Paper - Released Nov 1996 Final Report - Released March 1997):           

    "Also relevant is the Inquiry’s concern with fairness, or the equitable treatment of the various users of the financial system."

    On-going monitoring of credit card pricing in anticipation of a substantial inquiry into the effects on consumers of the deregulation of credit card interest rates"

The Australia's banking regulator has had its head buried in the sand for almost 20 years.  If almost 20 years ago, Westpac's submission to the Wallis Inquiry could anticipate how deregulation of credit card pricing could adversely impact consumers of credit cards, why hasn't Australia's banking regulator been so inept, when other regulators like the ICAC can do its job?  Albeit prodded into action by SMH's Ms. Kate McClymont.

The RBA has allowed some Credit Card Issuers to engage in Numeracy And Literacy Targeting as summarised at Quantitative, Qualitative, Expert Authority And Newspaper Article Evidence Of Unfair Credit Card Costs Which Prey Upon Financially Uneducated And Vulnerable Australians. 

The RBA has abrogated its charter/mandate to ........best contribute to the economic prosperity and welfare of the people of Australia" by allowing too many Credit Card Issuers to employ  Numeracy And Literacy Targeting of Financially Uneducated And Vulnerable Australians as decreed by the -

(i)         Productivity Commission's Staff Working Paper Links Between Literacy and Numeracy Skills and Labour Market Outcomes dated Aug 2010 (explained in Foundation skills attainment); and 

(ii)        ABS'  PIAAC 2011-12 report evidences that over 40% of Australians possess numeracy and literacy skills less that level 3,

more recently with Balance Transfer Interest-Free Period Offers.