Letter to Michael West (in Word format)   Annexure A   Annexure B    Annexure C   Defined Terms and Documents  

Michael West
C/- Michael West Media        website@michaelwest.com.au

Dear Mr. West

The Reserve Bank breached its Statutory Duty and Fiduciary Duty to Credit Cardholders with poor Financial Literacy Capacity for inter alia not informing the Federal Govt. as far back as late 1992 (obligated under Section 11(1) of the Reserve Bank Act 1959) that it (the RBA) needed to be re-impose a maximum interest rate cap (limit) on Credit Cards because the spread between the Overnight Cash Rate and the Purchase Interest Rate exceeded 16% (in June 1992).  Whereas when the 18% interest rate cap on all Credit Cards was removed by the RBA in April 1985, the spread was less than 1%, which is why that 18% cap was removed

The Writer's  Submission to Maurice Blackburn (on CD) sought it to run a Class Action against the RBA on behalf of 400,000 circa Eligible Persistent Revolver Plaintiffs, that are Financially Uneducated And Vulnerable Australian Credit Cardholders with poor Financial Literacy Capacity that have been preyed upon by Predatory Advertising.  Each of the 400,000 circa had paid in excess of $20,000 in Interest and Penalty Fees, too often enduring Unconscionable Credit Card Interest Charging at Usurious Interest Rates.  Evidence Of Unfair Credit Card Practices Which Prey Upon Financially Uneducated And Vulnerable Australians by Numeracy And Literacy Discrimination contains a veritable welter of evidence, across a variety of platforms, of inter alia Extreme Financial And Emotional Distress Suffered by the 400,000 circa Eligible Persistent Revolver Plaintiffs 

Maurice Blackburn response letter dated 14 July 2017 (two full pages) included:

Meanwhile the Parliamentary appointed Gatekeeper with a charter to inter alia "best contribute to.......... the economic prosperity and welfare of (ALL) the people of Australia", had remained asleep at the wheel.  Prior to the Campbell Report circa early 1980's, the same 'central bank' regulated all Australian bank interest rates with an Iron Fist.  The Principal Regulator of the Payments System has been complicit in some Credit Card Providers targeting Australians with poor numeracy and literacy skills - detailed in Labyrinth of ‘Concealed Spiders’.   67% of Credit Cardholders, referred to by the RBA as Transactors, receive their Lines of Credit at virtually no cost, with some receiving Reward Points

It took the threat to Brand Name of inter alios the Four Pillars from a Royal Commission into Misconduct in Banking for a Red Faced ABA, under a parachuted in, Anna Bligh, to urgently prohibit some Unconscionable Credit Card Practices by regulating ALL Credit Card Issuers in Aust. to implement, no later than 1 July 2019, the ABA's 'Banking Code of Practice' that inter alia Outlawed the Unconscionable Practice of charging interest on all Purchases made during the previous month unless every dollar of those Purchases was repaid by the Payment Due Date - that existed in in Example 1 - Unconscionable Conduct - St George Visa Card.

1.       Overview

In May of this year, Choice CEO, Alan Kirkland, asserted that Credit Card Providers have stolen $6.3 billion from customers “by failing to pass rate cuts on for credit cards, banks have effectively stolen $6.3 billion from the pockets of Australians,” Mr Kirkland said   "The 10 worst credit cards in Australia – and why you should avoid them like the plague"

*    "CHOICE is calling on banks to cap interest rates at 10% to stop the spread of long-term credit card debt"
*    "High-interest cards can have you paying back nearly ten times more in interest than low-rate cards over the long term"

Persistent Revolvers that account for a mere 12.58% circa of Credit Cardholders contributed a whopping 80% circa of that $6.3 billion Interest And Penalty Fees Revenue due to Credit Card Issuers not passing on falls in the Overnight Cash Rate.  The remaining 20% of that $6.3 billion was paid by other Revolvers that account for 20.42% circa of all Credit Cardholders.  The remaining 67% circa of all Credit Cardholders, described by the RBA as Transactors, contributed zilch of that  $6.3 billion.  Hardly, an example of the User Pays Principle that "RBA's Reform of Credit Card Schemes in Aust: "A Consultation Document" – Dec 2001 advocated the application to Credit Card Products.

Back in 2011, after sharing emails with Ms. Sharon van Etten, Public Relations Officer, Media & Public Relations Office, Reserve Bank of Australia, the Writer posted his extensive submission (on 3 CDs and A4) to the RBA on 8 Dec 2011 seeking application of the User Pays Principle to Credit Card Products.  Section 8 of his submission accords with recommendations within "RBA's Reform of Credit Card Schemes in Aust:  "A Consultation Document" – Dec 2001.  "A movement towards a “user pays” approach to credit card payment services would be consistent with the approach adopted by Australian financial institutions in pricing other payment instruments under their control."

Inaction by APRA and ASIC has been attributed to some scandals exposed in the Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry.  Puzzlingly Australia's Principal Regulator of the Payments System came out of the Royal Commission unscathed.  It should not have because of the Extensive Powers bestowed upon the Reserve Bank, in particular under the Payment Systems (Regulation) Act 1998, conferred an obligation upon the RBA to inform the Commonwealth Govt. that it (RBA) needed to re-impose a maximum Credit Card interest rate limit/cap as far back as late 1992 by -

• setting Standards that "are in the public interest" relying (from July 1998) on Division 4, Section 18 of the Payments System Regulation Act 1998,

• for a previously Designated Payments System (under Division 2—Section 11 of the Payment Systems (Regulation) Act 1998,

• after having also previously imposed an Access Regime under Division 3 Section 12. 

Below is an extract from Designated and Regulated Payment Systems that evidenced that the RBA had actioned all the 'conditions precedent' in order to re-impose a maximum interest chargeable relying upon the Payments System Regulation Act 1998:

"The RBA -

1. 'Designated' Credit Card Schemes in Australia on 12 April 2001, relying on Division 2, Section 11 of the Payment Systems (Regulation) Act 1998.  The RBA overtly stressed when it opted to 'Designate' "...credit card schemes in Australia under its regulatory oversight."... that ...."the standards will not cover the setting of credit card fees and charges to cardholders and merchants, or interest rates on credit card borrowings"

2. Imposed an 'Access Regime' on 23 Feb 2004 on each of the three designated credit card schemes in Australia (Visa, MasterCard and Bankcard) relying upon Division 3 - Access to designated systems, Subdivision A - Access regimes of the Payment Systems (Regulation) Act 1998; and

3. Determined 'Standards' pursuant to Division 4, Section 18 of the Payments System Regulation Act 1998 that "are in the public interest" on 1 Sept 2016 and 1 July 2017.

Failure to notify successive Commonwealth Govt’s that the Principal Regulator of the Payments System needed to re-impose a maximum interest rate to protect in alios Credit Cardholders with poor Numeracy and Literacy Capacity constitutes gross negligence and willful misconduct of its regulator obligations under civil law because –

1)         RBA’s paper "Reform of Credit Card Schemes in Aust:  "A Consultation Document" in Dec 2001 argued for greater application of the User Pays Principle; and

2)         Six Pivotal Credit Card Publications during the last 26 years, three of which were written by the RBA, identified that interest rates on Credit Cards against reductions in the cost of funds, were most sticky,  "...The rate on credit cards is found to be the most sticky, followed by personal loan rates, the housing loan rate and the small business overdraft rate"; and

3)       12.58% of all Credit Cardholders, described by the RBA as Persistent Revolvers have paid 80% of all Interest and Penalty Fees Revenue.

Section 2 B. of Extensive Powers and Responsibilities evidence that the RBA's powers and obligations to 'inter alia' "best contribute to.......... the economic prosperity and welfare of the people of Australia" are "unique among central banks" and exceed the obligations upon the USA and UK 'central banks' to their peoples' welfare.

Recommendation 30 (page 254) of the Financial System Inquiry - Final Report - Nov 2014  recommended "Strengthening the focus on competition in the financial system" by reviewing "the state of 'competition' in the financial system every three years":

Recommendation 30 Review the state of competition in the sector every three years, improve reporting of how regulators balance competition against their core objectives, identify barriers to cross-border provision of financial services and include consideration of competition in the Australian Securities and Investments Commission’s mandate.

"As an immediate first step, regulators should examine their rules and procedures to assess whether those that create inappropriate barriers to competition can be modified or removed, or whether alternative and more pro-competitive approaches can be identified.42 Each regulator should report back to Government prior to the first external review of the state of competition.

Government should update ASIC’s mandate to include a specific requirement to take competition issues into account as part of its core regulatory role.43

Both ASIC and Australian Treasury are members of the Council of Financial Regulators.  The abovementioned Financial System Inquiry Final Report sits on the Australian Treasury website. Notwithstanding the need to "Review the state of competition in the sector every three years", seemingly, neither ASIC, nor Australian Treasury, has nudged the RBA to re-impose a maximum interest rate on Credit Cards or indeed encourage Credit Card Issuers to reduce interest rates on their existing Credit Cards.   Apart from the ACCC, or regulators are adept at keeping a chair warm.

2.       Australia's Central Bank previously regulated all bank interest rates

Prior to the Campbell Report circa early 1980's, the RBA had imposed an 18% maximum interest rate upon all Credit Card Issuers.  Australia's banking history evidences that "... when de-regulation resulted in adverse consequences, re-regulation ensued...".  Due to failures of banks in the 19th century, Australian banks had been highly regulated.  Particulars of deregulations and subsequent re-regulations are well chronicled.  That 18% cap on the maximum interest rate on all Credit Cards was withdrawn in April 1985 when the Overnight Cash Rate was a smidgeon over 17% during an era of very high inflation.

Until 1980 banks could not offer more than 3¾% on a passbook account.  "From 1966, when personal loans were introduced, the maximum rate that banks could charge was set by the Reserve Bank."

Four Economic Reasons for the Campbell Committee Report – Sept 1981 notes inter alia that the Campbell Report recommended removal of the caps on all bank products in an era when commercial interest rates skyrocketed and building societies, credit unions and finance companies had been progressively poaching traditional national and state bank’s depositors’ balances (accounts) since the late ‘70s. “.. by the early 1980s the banks’ share of savings had fallen to 40 per cent, compared with 70 per cent in the early 1950s.”  The Overnight Cash Rate peaked at 30% in June 1985.

The RBA's "Our Role" represents to "best contribute to.......... the economic prosperity and welfare of (ALL) the people of Australia". That obligation to "the people of Australia" far exceeds the obligations upon the USA and UK 'central banks', to their peoples.

The Payment Systems (Regulation) Act 1998 obligates the Payments Systems Board to always Act in the Public Interest.  The Act "allows it to undertake more direct regulation of ‘designated’ payments systems when it judges it to be in the public interest. This may involve the imposition of access rules or operating standards for participants in such systems."

The Bank’s powers in this area, set out in the Payment Systems (Regulation) Act 1998, allow it to undertake more direct regulation of ‘designated’ payments systems when it judges it to be in the public interest. This may involve the imposition of access rules or operating standards for participants in such systems. The Act also provides a framework for regulation of purchased payment facilities, such as travellers cheques and stored-value cards."

*       under Section 11(1) of the Reserve Bank Act 1959 to " ....inform the Government, from time to time, of the Bank's monetary and banking policy" having regard to its obligations under Section 10(2) 'Functions of Reserve Bank Board' of the Reserve Bank Act 1959  to "best contribute to.......... the economic prosperity and welfare of the people of Australia", to set new Standards under Division 4, Section 18 of the Payments System Regulation Act 1998 to re-regulate a maximum Purchase interest rate and re-regulate a maximum Cash Advance interest rate after it published LOAN RATE STICKINESS: THEORY AND EVIDENCE in June 1992 to adopt other User Pays Principle fee changes that -

5.     Australia's Central Bank should have regulated most of the changes pronounced in the ABA's 'Banking Code of Practice at least twenty years earlier

In view of the above noted obligations, at least from the Payment Systems (Regulation) Act 1998, if not several years beforehand, -

*       Australia's Principal Regulator of the Payments System has breached its Statutory Duty to "best contribute to.......... the economic prosperity and welfare of (ALL) the people of Australia"; and

*       its Payments Systems Board has abrogated its responsibility to always Act in the Public Interest by failing to "..undertake more direct regulation of ‘designated’ payments systems when it judges it to be in the public interest",

due to condoning Two Exceedingly Costly Monthly Interest Charging Practices by many Credit Card Issuers that Targeted Credit Cardholders With Low Financial Literacy Capacity, whereupon Financially Uneducated And Vulnerable Australians have suffered Extreme Financial And Emotional Distress. 

READ Two Exceedingly Costly Monthly Interest Charging Practices carefully because it explicitly evidences that the Reserve Bank has breached its Statutory Duty and Fiduciary Duty to Credit Cardholders with poor Financial Literacy Capacity.  Persistent Revolvers that account for a mere 12.58% circa of Credit Cardholders contribute a whopping 80% circa of all Interest And Penalty Fees Revenue generated from Credit Card Products.  The numeric dollar magnitude of those losses is explained in the Writer's Submission to Maurice Blackburn lawyers.

Why is the Writer so adamant that the RBA has patently failed is parliamentary responsibilities?  Answer: Because LOAN RATE STICKINESS: THEORY AND EVIDENCE (June 1992) recognised that Credit Card Issuers were not passing on reductions in the cost of funds but did ziltch about making them when it possessed the Extensive Regulatory Powers to do so:

Unconscionable Credit Card Interest Charging focuses on a significant change in interest charging for Credit Cards that a Red Faced ABA, under a parachuted in, Anna Bligh, has regulated on ALL Credit Card Issuers in Aust. to implement no later than 1 July 2019 under the ABA's 'Banking Code of Practice'. These regulated changes followed years of deceit perpetrated voracity fostered under Ms. Bligh's two predecessors, David Bell and then Steven Münchenberg.  Below is a critical extract from Unconscionable Credit Card Interest Charging:

"ABC News article, Banks revamp code of practice in face of scandals, royal commission -

(A).     informed that the current CEO of the ABA, Anna Bligh, announced in late Dec 2017 that the ABA had just lodged a 'Banking Code of Practice' with the Australian Securities and Investments Commission (ASIC) for approval; and

(B).     listed several changes that will be legally binding on all 'member banks' of the ABA which includes:

                   "Customers only paying interest on what remains on a credit card and not the full amount of purchase if a loan is being paid down."

The fact that the ABA has made it mandatory in its recently lodged Banking Code of Practice that its members charge interest on ONLY any unpaid portion of the Closing Balance after the Payment Due Date is patent evidence that the previous long-running practice (explained in Unconscionable Credit Card Interest Charging) was Unconscionable Conduct targeted at Credit Cardholder with poor Financial Literacy Capacity." 

• Writer's letter to Ms. Sharon van Etten, Public Relations Officer, Media & Public Relations Office, Reserve Bank of Australia dated 8 Dec 2011 seeking application of the User Pays Principle to Credit Cards.

• Writer's Submission to Maurice Blackburn dated 25 June 2017 and Maurice Blackburn's response letter dated 14 July 2017.

• Writer's Submission to Adele Ferguson dated 5 Oct 2019 that provided evidence for a Second Wave of the Royal Commission into Financial Services

• Writer's Submission to Ian Verrender dated 5 Feb 2020 that provided evidence for a Second Wave of the Royal Commission into Financial Services.

Neither Adele Ferguson nor Ian Verrender responded to the above written approaches.  Perhaps because Credit Card Products are the most differentiated product (in both 'variety of types' and 'quantum of providers') in the entire Western World - by a country mile.  And the legislation that governs the RBA's obligations and rights is manifold and complex.

So complex that if the 2018 Royal Commission into Financial Services had kicked-off by investigating Unconscionable Conduct by many Credit Card Issuers that manifested over the last 20 years, Commissioner Hayne could have expended all of 2018 cleaning up only one banking product, albeit the most prolifically used, such is the breadth and depth of Unconscionable Conduct ostensibly targeted at Financially Uneducated And Vulnerable Australian Credit Cardholders with Low Financial Literacy Capacity.

If the recent contrite behaviour by the Financial Services Sector, specifically the commercial banks, is to remain, the RBA must be held to account for the Extreme Financial And Emotional Distress that the Financially Uneducated And Vulnerable Persistent Revolvers, not limited to the 400,000 circa Eligible Persistent Revolver Plaintiffs that the Writer presented in his Submission to Maurice Blackburn in 2017, have suffered during the last 20 years or so, where the vast majority received their first Credit Card in their late teens or very early adulthood, with not a skerrick of money management understanding.

Yours sincerely

Philip Johnston - the Writer