8. Philip Johnston asks the RBA to
-
a) accept that unlike the
powerful lobby groups noted in Section 2 above,
Credit Cardholders do not have
access to a powerful lobby group to protect their interests; and
b) provide A) to
H) below so that the
credit card system is paid for by its users on a "user pays basis", and not by
many who can least afford it, because they were not "lucky" enough to be born with,
or taught, requisite money management skills or take on a hefty mortgage during
a period when the property market continued to appreciate
Attachment 'B'
provides an impressive
array of achievements by the RBA in administering the credit and debit card
systems. In doing so, the RBA provides precedent for
this letter requesting the RBA to rely upon the Payment
Systems (Regulation) Act 1998 which gives the RBA
"extensive powers" to
-
A) "gather
information from payment system participants and operators"
by proceeding to obtain data
for a
particular month (or quarter)
from over 70 issuers
for the 330 different
types of cards that are available which shows:
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;
B) "determine rules for participation in a payment
system and set Standards for safety and efficiency, incl. issues such as
performance benchmarks"
by proceeding to implement
"cost-based benchmarks"
[akin to (I.), (II.) and (III.)
in Section 2 [of this letter to the RBA] by -
(a) setting
a regulatory cap for all
the 330 different types of cards which fall under the jurisdiction of the
RBA of -
i) 850 basis
points above the RBA official interest rate (Overnight
Cash Rate) as the maximum annual on-going
interest rate charged by
Credit Card Issuers in Australia for
Purchases, where Credit Card Issuers can reach, but not exceed, this Purchase Interest Rate Cap;
ii) 950 basis points above the RBA official interest rate
(Overnight Cash Rate) as the maximum
annual on-going interest rate charged by
Credit Card Issuers in Australia for
Cash Advances, where Credit Card Issuers can reach, but not exceed, this
Cash Advance Interest Rate Cap - refer
50% cap on cash advances in D) below; and
iii) $90 for the
maximum Annual Credit Card Fee that a
Credit Card Issuer can charge
(in 1993
restrictions on annual fees for credit
cards were removed, so it is not unreasonable to introduce a cap,
particularly as some cards charge inordinately high annual fees to provide 'inter alia' high loyalty points which surprisingly avoid income and FBT
taxes. Why should a
Credit Cardholder be entitled to claim as a tax
deduction an annual fee of $395 to then earn 3 points for every dollar spent
and not pay income tax on that earning?)
(b)
learning from point 1. of CBA's research in Section 4, set an 'Access Regime'
that each
credit card issued in Australia to a person who has
not previously owned a credit card be a Provisional Charge Card,
hereinafter PCC, with a conservative credit limit where the owner of the
PCC is required for the initial 12 months to repay the
outstanding balance on the PCC in full by the due date (9 days from the Issue
Date and 7 days from the normal receipt date for postal delivery) or be subject to severe late fees and restrictions on future
PCC use,
with
deferment of receiving a traditional Credit Card until the PCC owner complies with the PCC
repayment obligations for 12 months without breach.
C) reduce the non-interest period from 'up to 55 days' to 'up to 42 days' to reduce the cost burden on
Credit Card Issuers
because electronic payments enable
Credit Cardholders to pay their monthly
repayments within a few days of notification of the final monthly balance.
D) continue to sanction the market practice of not providing a non interest period
for
Cash Advances, but restrict the limit for Cash Advances to 50% of the
total credit limit because as
Wikipedia explains -
* "a
credit card is a small plastic card issued to users
as
a system of payment"; and
* the original cards
"required
the entire bill to be paid with each statement".
E) increase the
minimum repayment required from 2.5% to 25% of the outstanding debit balance
which shouldn't faze over >60% of Credit Cardholders and will materially reduce the
interest burden on the remaining <40%.
F) allow
Credit Card Issuers to levy -
a) an explicit 'Lost Card Fee' for -
* placing a stop on an account; and/or
* issuing a replacement credit card(s) commensurate with the cost to the
Credit Card Issuers of
issuing a replacement credit card(s); and
b) a 'Fraud Provision Fee' upon each
Credit Cardholder each month based on the quantum of transactions and the
outstanding undrawn indebtedness (eg. for a
Credit Cardholder with a $5,000
credit limit, who made 10 purchases in a month, with an outstanding undrawn
balance of $3,000 (vulnerable to fraudulent access) the 'Fraud Provision Fee'
for that month would be say 10 @ 0.15c = $1.50 + say $3,000 @ 0.0003c = $0.90 for a total monthly
'Fraud Provision Fee' of $2.40 for enjoying the convenience of using a
credit card
for 10 transactions with a $5,000 credit limit.
G) establish a
uniform credit evaluation methodology that all Credit Card Issuers must
observe similar to
NAB's Microenterprise Loans
because to many Australian adults are obtaining credit cards
with excessive interest rates which would be lower if the defaults were lower
due to a robust standard credit analysis methodology.
H) prosecute the
case on behalf of the "unlucky" Australians with
Baycorp Advantage
'et al'
and the Credit Card Issuers to establish and
regulate protocols and systems so "unlucky" Australians
cannot obtain
between 6 and 10 credit cards, as evidenced by Tony Devlin, Head
Financial Counsellor,
Salvation Army's Moneycare service, in Section 4 above.
Attachment 'C'
and
Attachment 'D'
provides authority for the
RBA Board and the
PSB to -
I. pursue A)
to H) above;
and
II.
inform the Government that the RBA's monetary and banking policy needs to
regulate to implement B)(a) and B)(b) above
"for the economic prosperity and welfare of
(ALL) the people of Australia"
and not merely the "lucky" ones.