Predatory Sale Of A Financial Product or Predatory Advertising or Predatory Lending or Predatory Marketing or Predatory Marketing Practices means for the purpose of this analysis of Credit Cards, Credit Card Issuers that engage in Numeracy And Literacy Targeting of Credit Cardholders that possess level 1 (or below) and level 2 Financial Literacy Capacity and are vulnerable to becoming a Revolver (61.87% circa are Occasional Revolvers and 38.13% circa are Persistent Revolvers) that often pay Usurious Unsecured Interest Rates which is contrary to the RBA's parliamentary decreed role to ensure "...the economic prosperity and welfare of (all) the people of Australia".
Predatory Sale Of A Financial Product is any lending practice that -
(a) imposes unfair or abusive loan terms on a borrower; or
(b) convinces a borrower to accept unfair terms through deceptive, coercive, exploitative or unscrupulous actions for a loan that a borrower doesn’t need, doesn’t want or can’t afford.
Predatory Advertising constitutes Unconscionable Conduct.
Balance Transfer Interest-Free Period Offers explains that some Credit Card Issuers prior to the National Consumer Credit Protection Amendment (Home Loans and Credit Cards) Act that came into effect on 1 July 2012 -
(i) promoted Balance Transfer Interest-Free Period Offers which targeted Financially Uneducated And Vulnerable Australians that may already be burdened by high monthly interest costs on large Outstanding Indebtedness, and probably incurring Late Payment Fees and Over-the-Limit Fees. These particular Balance Transfer Interest-Free Period Offers advertised that they did not charge interest on a Balance Transfer amount for up to 18 months; and
(ii) applied monthly repayments to an 'Order of Payments' Allocation Practice relying upon the fine print of the voluminous Credit Card contract which specified which balance(s) would be paid first. In nearly all cases monthly repayments applied to lowest-rate balances first - highest-rate last.
Hence, prior to 1 July 2012 many Credit Card Issuers advertising a Balance Transfer under a 'Teaser Interest Rate' (Nil or low interest rate) for up to 18 months would apply monthly repayments for Purchases to the Balance Transfer amount and not to any recent Purchase/s or Cash Advance, which had higher annual percentage interest rates. Whereupon many Financially Uneducated And Vulnerable Australians that were already burdened by high monthly interest costs on large Outstanding Indebtedness, and had moved their existing Outstanding Indebtedness due to an offer of a Balance Transfer Interest-Free Period Credit Card commenced paying interest on Purchase and their Balance Transfer amount at interest rates up to 22.84% on their existing Outstanding Indebtedness because their monthly repayment of their Closing Balance had been applied to their Balance Transfer amount.
Post 1 July 2012 some Credit Card Issuers devised new methods to exploit Credit Cardholders with poor Financial Literacy advertising Balance Transfer Interest-Free Period Offers which are explained in Labyrinth of ‘Concealed Spiders’ -
(A) Example 3 highlights that some Credit Card Issuers of Balance Transfer Credit Cards have since introduced, but not overtly publicised to prospective new customers, that an Interest Free Period will not apply on Purchases until after the Balance Transfer amount is repaid in full and the Credit Cardholder has repaid its Total Amount Owing, including its Balance Transfer amount;
(B) Example 4 highlights that on some of the Balance Transfer Interest-Free Period Offers, should the Credit Cardholder make a Purchase/s and not repay their Balance Transfer amount and any Purchase/s by the Payment Due Date, s/he will not only be charged interest on the aggregate of their Purchases and the Balance Transfer amount, but also forego their Interest Free Period for up to the subsequent two months; and
(C) some Credit Card Issuers of Balance Transfer Credit Cards provide a Calculator for prospective new customers to determine how much interest they could save during the 'Teaser Interest Rate' (sometimes 0%) for an 'Introductory Period' (from 3 months to 24 months). Hidden in the fine print is An assumptions that this calculator makes is that "You don’t make any purchases on your card until the promotional period ends or the balance transfer is paid in full." See Calculate how much interest you could save!
In early 2017, Citibank has been heavily advertising its Citi Rewards Platinum Credit Card, Citi Classic Credit Card and its Citi Simplicity Card which offer a Zero Balance transfer for 24 months and 15 months respectively using Predatory Advertising - Example 8.
In April 1985 the 18% interest rate Cap on Credit Cards was removed when the Overnight Cash Rate was 17.2% circa - spread was less than 1%. Less than two years ago the spread between the Overnight Cash Rate of 0.10% and the highest Cash Advance interest rate (Latitude Financial's Go Mastercard) was over 28%. 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, whichever is greater = 28.9%. It also charges an explicit 'Late fee' of $35. Little wonder that Credit Cardholders with low Financial Literacy get lured into applying for a Latitude Financial GO Mastercard because of deceptively offering 'Enjoy now. Pay later. Interest Free'.
See:
Choice head of campaigns Matt Levey said the banks were exploiting customers' failure to understand the full cost of making payments on credit, with more than $35 billion in credit card debt accruing interest each month. ''It's basically just [banks] taking advantage of a product that's poorly understood. While there's an extensive media spotlight on home loans, it seldom extends to credit cards,'' Mr Levey said.
Australia’s most predatory credit cards revealed
NEW NATIONAL CONSUMER CREDIT LAWS PROTECT CONSUMERS FROM PREDATORY LENDERS
Big banks accused of setting 'debt traps' with credit cards
How a USA Supreme Court ruling killed off usury laws for credit card rates
"Reform to unfair practices in consumer leases and short term lending as well as providing better protection to reduce the incidence of predatory lending and equity stripping, particularly for the most disadvantaged." - Green Paper on National Credit Reform - The Treasury, Corporations and Financial Services Division
High Fee — Low Credit Predatory Credit Cards Prey Upon the Poor - Nov 2007
Prime Minister, Scott Morrison, acknowledges that "...unfair and predatory practices..." have existed with Credit Cards in Press Release "Protecting Aussies from predatory credit card practices - 22 June 2017