3rd Question

Thirty Two Questions and Supporting Evidence Submission Letter to Royal Commission April-2018 Defined Terms & Documents

3rd Question

Will the Royal Commission ask the Governor of the Reserve Bank -

1. what did the Reserve Bank hope to achieve from publishing Reform of Credit Card Schemes in Aust: "A Consultation Document" in March 2001; and

2. why it has not over the subsequent 17 years informed the Commonwealth government, as obligated under Reserve Bank Act 1959 - Section 11, 'Differences of opinion with Government on questions of policy', of the need to determine in the Public Interest new Standards to apply the User Pays Principle to the Retail Supply Side of Credit Card Products?

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Supporting Documented Evidence re 3rd Question

1. Below is an extract from Section 5.2 'Scheme regulations and competition benchmarks' on page 115 of the above-mentioned Reform of Credit Card Schemes in Aust: "A Consultation Document" – Dec 2001:

"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

2. Below is an extract of the second paragraph of User Pays Principle:

"Credit Card Products are both ubiquitous and unique. Almost 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 gallon of petrol command a price that the purchaser, rich or poor, pays. Approx. 67% of Credit Cardholders, those that are Financially Educated with level 3, 4 and 5 Financial Literacy, that are referred to as Transactors by the Reserve Bank, make almost no payment for enjoying a Line/s of Credit for up to 55 days, with the majority of Transactors receiving Rewards Programs. The remaining 33% circa who are Financially Uneducated And Vulnerable Australians, with level 1 and 2 Financial Literacy, pay the operating costs and generate the profits explained in Interest And Fees Revenue, of Credit Card Issuers. Reserve Bank reports refer to this 33% cohort as Revolvers. Hence, one third of Credit Cardholders pay the cost of almost two thirds of Credit Cardholders that enjoy a Line/s of Credit for an ave. $2,923 (per card) for between 45 days and 55 days before those "almost two thirds" physically pay for their Purchases."

3.         After a few emails and a 'phone chat with Ms. Sharon van Etten, Public Relations Officer, Media & Public Relations Office, Reserve Bank of Australia, the Writer posted on CD his detailed Submission dated 8 Dec 2011 to the Reserve Bank that beseeched the RBA to rely upon its Extensive Powers to Determine and Set New Standards, relying on Section 18, that require Credit Card Issuers in Australia to adopt the User Pays Principle - listed A) to H) in Section 8 - because -
*          Transactors enjoy their Lines of Credit for virtually no cost; and
*          Persistent Revolvers that possess poor Financial Literacy Skills contribute 80% circa of all Interest And Penalty Fees Revenue generated from Credit Card Products;

4. In an ABC science TV programme in the late 1960's, American professor Julius Sumner Miller would regularly ask, "Why is it so?". The answer with regard to why many Credit Cardholders with poor Financial Literacy Capacity pay the costs of Transactors enjoying their Line/s of Credit, and contribute profits of Credit Card Issuers, is because Credit Card Products are the most differentiated product (in both 'types' and 'providers') in the entire Western World because the 'money lenders' in the 21st Century, as likely around the 30th year of the 1st Century, focus on one or more promoted benefits, but often misrepresent the material hidden cost/s to possibly procure that benefit/s. Predatory Advertising targets Credit Cardholders with poor Financial Literacy Capacity.

The Reserve Banks obligation under Section 11(1) of the Reserve Bank Act 1959 "to inform the Government, from time to time, of the Bank's monetary and banking policy" and to Act In The Public Interest when exerting its authority under the Payment Systems (Regulation) Act 1998 are set out under 'Supporting Documented Evidence re Question 1' and 'Supporting Documented Evidence re Question 2' above.

The reason this entirely unfair pricing structure that feeds off Financially Uneducated And Vulnerable Credit Cardholders with low Financial Literacy Capacity that pay the cost of the Revolving Line/s of Credit held by Transactors is because the 'central bank' that regulated the maximum interest rate of 18% on Credit Cards until April 1985 'has never been game to unearth a veritable can of worms' by relying upon Part 5—Miscellaneous, Section 26 of the Payment Systems (Regulation) Act 1998 to ask Credit Card Issuers to provide financial data to it that measures the level of Interest And Penalty Fees Revenue borne by Revolvers and in particular borne by Persistent Revolvers of the type sought by the Writer in Section 8, clause A) - explained in:

* Point 5 under Supporting Documented Evidence re 1st Question; and
* Point 7 under Supporting Documented Evidence re 3rd Question (shortly below).