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

Annexure A

Two Exceedingly Costly Interest Charging Practices that the RBA failed to rectify at least 15 years ago to the material detriment of Credit Cardholders with poor Financial Literacy Capacity, invariably through no fault of their own. 

The 1st Practice disregarded the patent findings in Six Pivotal Credit Card Publications, in particular Three 'Landmark' RBA Published Papers in the last 26 years that recognise the ever increasing spread between the Overnight Cash Rate and Highest Credit Card Interest Rates.

The 2nd Practice ignored the User Pays Principle that the RBA professed to observe / implement in its "RBA's Reform of Credit Card Schemes in Aust: "A Consultation Document" – Dec 2001 where -

*    on page -vii-

"Reform of the credit card schemes
21. ............... the Reserve Bank is of the opinion that the main regulations established by the credit card schemes in Australia do not meet the public interest test."

*    in Section 5:2

"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. As

the ABA itself has confirmed: “Pricing services efficiently provides consumers with choice to use lower cost distribution channels and, therefore, facilitates a more

efficient financial system. It is also fairer and efficient, because consumers only pay for what they use.”198

The principles that consumers should face prices that take into account the relative costs of producing goods and services, as well as demand conditions, and that

resources should be free to enter a market in response to above-normal profit opportunities, have been the guiding principles for tariff reform and market

deregulation in Australia. Such market reforms may impact unevenly on different groups – some gaining, some losing – but they are now the well-established route

to more efficient use of resources in the Australian economy."

1st Costly Interest Charging Practice:
Failing to re-impose a Maximum Interest Rate Cap as far back as late 1992 when the spread between the Overnight Cash Rate and the average Purchase Interest Rate exceeded 16% - back in June 1992

In not doing so, the RBA breached its Statutory Duty and its Fiduciary Duty by not seeking to re-impose a maximum interest rate on Credit Cards that had stood at 18% until it was removed in April 1985 when the spread/margin between to Overnight Cash Rate and that 18% cap was less than 1%.

Notwithstanding that the RBA openly professed in "RBA's Reform of Credit Card Schemes in Aust: "A Consultation Document" – Dec 2001 that the User Pays Principle should apply to Credit Card Products, its resile of that pursuit by not, inter alia, re-setting a maximum interest rate cap on Credit Cards -

A)       cost 400,000 circa Eligible Persistent Revolver Plaintiffs (identified in Six Pivotal Credit Card Publications) in excess of $20,000 each in Interest and Penalty Fees that suffered Extreme Financial And  Emotional Distress; and

B)       enabled 67% circa of Credit Cardholders, identified by the RBA as Transactors, to enjoy their Lines of Credit from using Credit Cards at virtually no cost - on breach of the User Pays Principle.

2nd Costly Interest Charging Practice:

Failing to outlaw the covert practice that many Credit Card Issuers progressively adopted from the late 1990s of charging Interest on the amount of Purchases that were not repaid on or before the Payment Due Date, unless the entire Closing Balance was paid in toto by the Payment Due Date

Australia's first Credit Card was Bankcard which 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.  Users of Diners Club and American Express had to repay their Purchases at the end of each month; a fundamental premise of a Charge Card.  Otherwise, the issuer cancelled the card.  A Charge Card provided assurance to the merchant that a personal cheque generally did not, unless the purchaser was known by the merchant.

By 1976 there were 1,054,000 Bankcard Cardholders, and 49,000 merchants accepting Bankcard.  Bankcard was accepted in all major department stores.  By 1984 there were more than 5 million Bankcard Cardholders in Australia and New Zealand.  Bankcard was withdrawn in February 2006, after foreign Credit Cards, ostensibly Visa and Mastercard, gained popularity.

Interest was charged on any portion of the Outstanding Indebtedness that was not repaid by the Payment Due Date.  History of Credit Card Issuers' T&Cs evidence that progressively (from the late '90s) most Credit Card Issuers jumped on the unconscionable bandwagon of charging interest on the full Closing Balance from the Payment Due Date, if the total Closing Balance had not been paid by the Payment Due Date.  If a Credit Cardholder was one day late in making its monthly Credit Card repayment, or was one dollar short of the Closing Balance in the amount it repaid, the Credit Cardholder was charged interest, often around 20%, on the full amount of its previous month's Purchases. These Unconscionable Credit Card Issuers, that had progressively jumped aboard the scam, and discretely amended the fine print in its T&C, then also withdrew the Interest Free Period for up to two months, which meant that the interest calc metre was running from the date of each Purchase in the subsequent one or two months which was a reprehensible 'penalty' - Explained in Unconscionable Credit Card Interest Charging, in particular Example 1 and Example 2.

At least 15 years ago, the RBA should have regulated the changes pronounced in the ABA's 'Banking Code of Practice (actionable by 1 July 2019), in particular that Credit Card Issuers charge interest after the Payment Due Date on only the unpaid portion of the Closing Balance, and not on the full Closing Balance.  Because the above 'penalty' of charging interest on all that month's Purchases, and thereafter denying the interest free period for up to two months, if the Cardholder's monthly repayment was one dollar short, or one day late, -

a)       did not observe the RBA's professed need to adopt User Pays Principle "... to be consistent with the approach adopted by Australian financial institutions in pricing other payment instruments under their control"; and

b)       overtly Targeted Credit Cardholders With Low Financial Literacy Capacity.  The range from Level 1 to Level 5 of Financial Literacy Capacity is explained at Numeracy And Literacy Range Of The Australian Population  relying on extensive reports by the Productivity Commission and the ABS

In not outlawing the afore-mentioned 'Penalties Targeting the Poor' that the ABA eventually acted upon as a Royal Commission into Misconduct in Banking encroached, that could have materially damaged its members' Brand Names, the -

to the material detriment of 400,000 circa Eligible Persistent Revolver Plaintiffs that –

B.         paid in excess of $20,000 each in Interest and Penalty Fees; and

C.         suffered Extreme Financial And Emotional Distress.