Two Exceedingly Costly Interest Charging Practices   Twenty Seven Questions and Supporting Evidence   Defined Terms and Documents

Unit 5, 13-15 Stokes St
Lane Cove North NSW  2066  0434 715.861

6 December 2022


Hon. Anthony Albanese                        334a Marrickville Road, Marrickville, Sydney 2204.

The Prime Minister, Australian Labor Party                                                                                                (02) 9564 3588 

PO Box 6022, House of Representatives, Parliament House                
Canberra ACT 2600                                                                               

Dear Mr. Albanese 


Due to the exceedingly high number of Credit Card Purchase Transactions Annually (3.296 bil circa in Australia - reported in RBA Excel file c01hist.xlsx) by Credit Cardholders that keenly avail the Three Purchase Benefits Of 'Tap And Go', it behooves the Federal Govt to invoke (pursuant to sub clause (xiii) of Section 51 'Legislative Powers of the Parliament' of the Australian Constitution) that Credit Card Issuers levy a tiny User Pays Fee on each Credit Card Purchase Transaction on all Credit Cards issued after the passing of requisite parliamentary legislation.  (A $50 Purchase using a Credit Card issued after requisite parliamentary legislation would incur a 25 cents Variable Purchase Fee and a 10 cents Fixed Purchase Fee  =  35 cents User Pays Fee).

A teeny User Pays Fee levied on all future issued Credit Cards for Purchase Transactions could accrue $1.84 billion circa annually in Purchase Fee Revenue being 47.3% circa of the Estimated Current Annual Credit Card Purchaser Interest Revenue (levied by Credit Card Issuers) of $3.889 billion circa annually.

If enough Australians wanted to show the world that Australia is truly an Egalitarian Country, where everyone Gets A Fair Go, even those with only Level 1 or Level 2 Financial Literacy Capacity, a minuscule User Pays Fee on each future Purchase using a Credit Card (that is issued/taken out after enactment of requisite parliamentary legislation) would then enable re-introduction of a Maximum Interest Rate Cap (that applied until April 1985) on all Credit Card Products (issued after enactment of parliamentary legislation). 

The New Maximum Interest Rate Cap should be the same as the interest rate for Unsecured Term Personal Loans Variable Interest Rate (calculated by the RBA) that is presently 14.4% p.a. 

As chronicled herein, some Cash Advance interest rates, together with associated Cash Advance Fees approached 30% p.a. (of the outstanding indebtedness) less than five years ago.  A maximum interest rate Cap in the order of 14.4% p.a. would take an enormous burden off Credit Cardholders with only Level 1 and Level 2 Financial Literacy Capacity identified by the RBA as Revolvers, in particular Persistent Revolvers that have unfairly 'carried the burden' of paying for the Retail Supply Side of the Credit Card System for at least the last 20 years. One third of Credit Cardholders  presently pay the provisioning costs of the other two thirds (identified by the RBA as Transactors) that have enjoyed a Free Ride for eons due to often Unconscionable Credit Card Interest Charging.

Ipso facto, the Federal Labor Government can now Action the aspirations of two recent former Labor Prime Ministers (Bob Hawke and Paul Keating) for Australia to truly be an Egalitarian Country in particular "...maintain our egalitarian values and preserve our social cohesion".

The Federal Govt. can be the first Western power to pass legislation intent upon 'righting the wrongs' of 'ravenous capitalism' that has been targeted at Financially Uneducated and Vulnerable Australian Credit Cardholders by requiring the beneficiaries of the Credit Card System that take out a Credit Card (after requisite legislation) to contribute towards current Interest and Fees Revenue that sustain the Credit Card System that "... is the payment instrument for which they receive the highest return."  Rather than Persistent Revolvers (only 12.58% circa of all Credit Cardholders) continuing to fund a whopping 80% circa annually of all Interest And Penalty Fees Revenue levied by Credit Card Issuers.

As reported in RBA Excel file 'c01hist.xlsx' worksheet Data (Column H of =SUM(Data!H453:H464)*1000 in Excel file CreditCardsSummayData) there were 3.296 bil Credit Card Purchases (across Australia) over the 12 months to end Sept '22.  The Estimated Current Annual Credit Card Interest Revenue (levied by Credit Card Issuers) is $3,889 billion circa annually.  Under this Writer's Equitable User Pays Cost Contribution Scheme that adopts the Proposed User Pays Fee Structure upon each Credit Card Purchase Transaction using Credit Cards issued after the passing of requisite parliamentary legislation, over 45% circa of the $3.889 billion circa Interest Income Annually, namely $1,840,098,622 circa can be accrued from those Credit Cardholders that enjoy the Three Purchase Benefits Of 'Tap And Go, in particular a Line/s of Credit by not paying for ‘goods and services’ for between 45 and 55 days after receipt.  

If the 13.2 mil Credit Cardholders across Australia did not own their Credit Card/s and required a $3,000 overdraft, a $3,000 personal loan would charge interest of between 6.75% and 23.84%No other Line of Credit in the Western World is free, as a fee is always levied.  In fact the ' economic fundamental' of the very basis of the User Pays Principle is that all essential items purchased in society have a price which is the same no matter if you are wealthy or poor.  A loaf of bread, a carton of beer, a litre of petrol commands the same price that the purchaser, rich or poor, has to pay. Sadly, unchecked ravenous money lenders managed to circumvent that economic fundamental of everyone paying the same price with respect to payments to use Credit Card Products.

This almost $2 billion circa of potential User Pays Fee Income annually would enable the previous regulatory practice of a Cap on the maximum interest to be re-imposed by parliamentary legislation that would align with the Unsecured Variable Term Personal Loan Interest Rate interest rate - presently 14.4% p.a. being the benchmark unsecured term personal loan variable interest rate referred to by journalists from Finder, Mozo, RateCity, CHOICE, SMH/The Age, The Australian, Guardian et al.

This Proposed Purchaser User Pays Fee calculation is a veritable Pimple on the backside of an elephant for Credit Cardholders enjoying the Three Purchase Benefits Of 'Tap And Go'A $30 Purchase would incur a 25 cents Purchaser User Pays Fee.  A $100 Purchase would incur a 60 cents Purchaser User Pays Fee.  This proposed Equitability Cost Contribution Scheme will ensure that all Australians, even those with only Level 1 or Level 2 Financial Literacy Capacity (separately measured by ABS, Productivity Commission and ASIC published reports) receive a Fair Go - as proclaimed by five former Prime Ministers in THE CONVERSATION article "In Australia, land of the ‘fair go’, not everyone gets an equal slice of the pie".

ASIC Report 224 "Access to financial advice in Australia" - December 2010 includes:

51 These results, when considered together with Australian Bureau of Statistics‘ research into Australians‘ general document literacy and numeracy,15 in particular their ability to meet the complex demands of a knowledge-based economy, suggest that about one in two Australians do not have the skills required to make informed choices in their interactions with the financial services sector.16  

1.    Only 50% of a Credit Card Limit could be drawn on Cash Advances

In concert with regulating that all new Credit Cards issued again have a Maximum Interest Rate Cap, the limit for Cash Advances on all future issued Credit Card Products be restricted to 50% of the total Credit Card Limit to materially restrict Predatory Lending and associated Extreme Financial And Emotional Distress that has invariably fallen upon folk with low Financial Literacy Capacity through no fault of their own. 

Early Credit Cards, and their predecessor the Charge Card, were established to facilitate Purchases.  Early Charge Cards -

(i)         enabled the 'Charge Cardholder' to Purchase goods and services, without presenting cheques or cash; and

(ii)        required the 'Charge Cardholder' to repay the 'Charge Card Issuer' the accrued 'Outstanding Amount' each monthly billing cycle by the statement due date, or be subject to severe late fees and restrictions on future card use.

Australia's first Credit Card was Bankcard launched in 1974.  Before 1974, only store cards, Diners Club and American Express were available in Australia and these were either restrictive or only accessible to the wealthy.  Unlike Credit Cards, which give Credit Cardholders a 'revolving' Line Of Credit, early Charge Cards did not allow the Outstanding Indebtedness to be carried forward and did not charge an interest rate.  Rather Charge Card providers relied on an annual issuance fee for their revenue stream.

2.    The Reserve Bank of Australia would support further application of the User Pays Principle

Australia's Principal Regulator of the Payments System would support further application of the User Pays Principle as it did in Section 5.2 of "RBA's Reform of Credit Card Schemes in Aust:  "A Consultation Document" – Dec 2001 (pg 117)

"Reform of credit card schemes will also have a direct impact on credit cardholders and is likely to result in some re-pricing of credit card payment services. However, this is the means by which the price mechanism is to be given greater rein in the credit card market. 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."

3.    The Reserve Bank has acknowledged that -

*    Transactors "...... pay no transactions fees, enjoy the benefit of an interest-free period and in many cases earn loyalty points for each transaction……

*    Credit Card Products "......are the payment instrument for which they (Credit Card Issuers) receive the highest return."


RBA's Consultation Document titled Executive Summary - Reform of Credit Card Schemes in Australia: RBA's "A Consultation Document" – December 2001 noted under point 6 of 'Introduction':


"Within the latter group, there is a third group which directly contributes very little to the costs of credit card schemes – these are the cardholders (known as ‘Transactors’) who settle their credit card account in full each month. Although they normally pay an annual fee, they pay no transactions fees, enjoy the benefit of an interest-free period and in many cases earn loyalty points for each transaction…… ...... Nor is it surprising that banks and other deposit-taking institutions are promoting most actively the credit card because it is the payment instrument for which they receive the highest return."

4.    This Credit Card Issuer charges close to 30% of outstanding indebtedness on a Cash Advance

Latitude Financial's 'Go MasterCard' had a Cash Advance interest rate of 29.49% until March 2019 Presently it is 25.9%, but now incorporates a Cash Advance Fee of $3 or 3% of the cash advance amount, whichever is greater = 28.9%.  It also charges an explicit 'Late fee' of $35 and $8.95 monthly account service fee when outstanding balance is greater than $10 Little wonder that Credit Cardholders with low Financial Literacy Capacity (independently classified by the Productivity Commission, ABS and ASIC) get lured into applying for a Latitude Financial GO Mastercard because of deceptively offering 'Enjoy now. Pay later. Interest Free'.

6.    How Credit Card Companies Make and Earn Money in the USA

How Credit Card Companies Make and Earn Money - ValuePenguin Credit Card Interest IncomeInterchange Income' rec'd from Merchants Visa, Mastercard and American Express earn Assessment Fees, which are assessed for processing a Merchant's credit card transactions. The Assessment Fee in the USA is 0.14% of each credit card transaction through Visa, and 0.1375% for Mastercard transactions.

7.    Bernie Sanders unveils legislation to cap credit card interest rates at 15%  -  USA Today  - 9 May 2019:

          "Sanders, who is vying for the 2020 Democratic presidential nomination, referred to credit card industry executives as "loan shark hoodlums" in three-piece suits as he outlined the legislation. He also accused the industry of "grotesque and disgusting" behavior................ And they see a real profit center in going after desperate people...who cannot afford the basic necessities of life."

8.   Social justice and equality for individuals, the family and all social units, and the elimination of exploitation

Below is number 11 of Basic Principles of the Australian Labor Party (NSW Branch):
    "Social justice and equality for individuals, the family and all social units, and the elimination of exploitation in the home."

Footnote:  "When an issue is important and is multifaceted one needs to occasionally hit 'Stop', press 'Rewind' and soak it all in once more, and slowly."

Yours sincerely

Philip Johnston