Defined Terms and Documents       

Why does the Payments System Board of the Reserve Bank believe that it has no regulatory power to seek Credit Card Issuers to provide financial data which identify the demographic cohorts that contribute 80% circa of Interest And Penalty Fees Revenue?  

80% circa of Interest Charges & Late Payment Fees is paid by less than 20% of Credit Cardholders identified by the RBA in Aug 2015 in Submission 20 as Persistent Revolvers

Whenever the RBA provides input to parliamentary reviews of the high cost of interest and fees of Credit Cards, the RBA invariably focuses on costs and not the percentage of revenues generated from Interest Charges and Late Payment Fees.

One could be excused for thinking that the Payments System Board "....has no regulatory power over...." seeking data from Credit Card Issuers to identify which demographic cohorts of Credit Cardholders are contributing 'the lion's share' of Material Interest And Fees at Usurious Unsecured Personal Loan Interest Rates Charged On Many Credit Cards because the Payments System Board -

(a)        must know that some Credit Card Issuers have been engaged in Numeracy And Literacy Discrimination "on their watch, for yonks" because of Productivity Commission and ABS published reports and because Payments System Board members enjoy Lines Of Credit at not cost, as do all their colleagues, friends and associates at not cost; and

(b)        does not want to 'open a can of worms' that would reflect long term negligence by Australia's Principal Regulator of the Payments System.

The 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."

Australia's Principal Regulator of the Payments System notes that the Role of the Reserve Bank of Australia, as decreed the Reserve Bank Act 1959 as amended, the Payment Systems (Regulation) Act 1998 and the Payment Systems and Netting Act 1998, includes "....to ensure that the monetary and banking policy of the Bank is directed to the greatest advantage of the people of Australia and that the powers of the Bank ... are exercised in such a manner as, in the opinion of the Reserve Bank Board, will best contribute to ...... the economic prosperity and welfare of the people of Australia.’

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".  WHY NOT, WHEN Section 50 OF THE Banking Act 1959 GRANTS THE AUTHORITY AND THE RBA HAS THE CHARTER/ROLE and Point 4. immediately below notes that the Payment Systems (Regulation) Act 1998 also gives the RBA "extensive powers" to "...gather information from a payment system or from individual participants."?

Attachment 'D' - Payments System Board's Responsibilities and Powers, 'et al' notes -

1.       "The Reserve Bank Act 1959, as amended, gives the Payments System Board responsibility for determining the Reserve Bank's payments system policy........ in a way that will best contribute to ......promoting the efficiency of the payments system; and promoting competition in the market for payment services, consistent with the overall stability of the financial system."

2.       "Increasingly, central banks are being given explicit authority for payments system safety and stability, but the Board's legislative responsibility and powers to promote efficiency and competition in the payments system are unique. This responsibility has broadened the Bank's traditional focus on the high-value wholesale payment systems which underpin stability, to encompass the retail and commercial systems where large transaction volumes provide scope for efficiency gains."

3.       "The Bank's wide-ranging powers in the payments system are set out in the Payment Systems (Regulation) Act 1998. It may .....'designate' a particular payment system as being subject to its regulation.......determine rules for participation in that system, including rules on access for new participants. Since access is inextricably linked to efficiency the Bank works closely with the Australian Competition and Consumer Commission (ACCC) set standards for safety and efficiency for that system. These may deal with issues such as technical requirements, procedures, performance benchmarks and pricing;

4.       The Payment Systems (Regulation) Act 1998 also gives the RBA "extensive powers" to "...gather information from a payment system or from individual participants."

5.       "The Reserve Bank Act 1959 provides a clear delineation between the Payments System Board, which has responsibility for the Bank's payments system policy, and the Reserve Bank Board, which has responsibility for the Bank's monetary and banking policies and all other policies except for payments system policy.  Instances of conflict over policies should therefore be rare. However, if a conflict were to arise, the view of the Reserve Bank Board would prevail to the extent that there was any inconsistency in policy."

RBA has done naught to require Credit Card Issuers to lower interest rates in line with the fall in the Cash Rate notes 'inter alia':

"The ACCC and the Payments System Board (RBA) should monitor the delivery fees charged on credit and debit cards while the ACCC should monitor the rules of international credit card associations to ensure they are not overly restrictive".

On 8 Dec 2011, the Writer posted 3 CDs to the Ms. Sharon van Etten, Media & Public Relations Office, Reserve Bank of Australia titled:

*           Request to the Reserve Bank of Australia to implement the same "competitiveness and efficiency" that it has overseen in the 'wholesale supply side' of the debit and credit cards products to the Retail Supply Side of credit cards, because banks profits from credit cards are not derived from the "User Pays Principle"

*           All users should pay the cost of their credit card transactions, and not some "unlucky" users paying a disproportionate burden which has further gapped the "Haves" from the "Have Nots" 

The Writer's afore-mentioned CDs that he posted to RBA in 2011 noted 'inter alia':       

"Based on my dealings with the RBA in the late '70s, and my understanding why Commonwealth Bank of Australia was divested of it central bank functions in 1959 (refer Section 3 below), and having considered Attachment 'C' and Attachment 'D', I am unable to comprehend your contention that "The Payments System Board of the Reserve Bank has no regulatory power over these aspects of credit cards."  I understand that the RBA has "...extensive powers..." to  "......encompass the retail and commercial systems where large transaction volumes provide scope for efficiency gains.....to gather information from a payment system or from individual participants" and is therefore authorised to request:

"All the banks to provide monthly (or quarterly) data on:

1.       Number of cards that repaid total indebtedness and aggregate dollar amount of those repayments.

2.       Number of cards that repaid > or =50% of total indebtedness and aggregate dollar amount of those > or = 50% repayments.

3.       Number of cards that repaid<50% but >5% of total indebtedness and aggregate dollar amount of those <50% but >5% repayments.

4.       Number of cards that repaid <=5% of total indebtedness and aggregate dollar amount of those <=5% repayments."

If the RBA has to create a new regulation(s), then it has the authority and charter to do so."

RBA has made efforts to divest itself of its Parliamentary Bestowed Mandate by seeking to pass its obligations to regulate 'inter alia' interest rates on Credit Cards to Australian Prudential Regulatory Authority (APRA) and Australian Securities and Investments Commission (ASIC).  Notwithstanding, the RBA is still bound by its Parliamentary Bestowed Mandate

Re the above "80% circa of Interest Charges and Late Payment Fees is paid by less than 20% of Credit Cardholders", see Interest And Late Payment Fees.