"A senate inquiry submission by Treasury noted that in 2013 only 30% of surveyed users reported paying interest on their credit card balance.98 . Contrary to this self-reporting though, the share of balances attracting interest at the time was in fact closer to two-thirds.99"
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SubmissionToRoyalCommission_Apr-18.htm
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18 April 2018
The Head of the Royal Commission into misconduct in the Banking, Superannuation and the Financial Services Industry
Honourable Kenneth Madison Hayne AC QC
FSRCenquiries@royalcommission.gov.au
1800 909 826
Dear Hon. Hayne
A Public Submission pursuant to the Royal Commissions Act 1902 (Cth) and clauses (g), (h) and (j) of the Terms of Reference for the Royal Commission into misconduct in the Banking, Superannuation and Financial Services Industry that details systemic failings in the non-statutory Council of Financial Regulators performance over the Credit Cards Payments System and the highly differentiated Credit Card Products
Click on Thirty Questions and Supporting Evidence for the Royal Commission to consider asking -
A. "the principal regulator of the payments system through the PSB", and Chair of the Council of Financial Regulators, which -
(1) has extensive powers to request information from payment system participants and operators regarding inter alia Credit Cards under, amongst other clauses, Part 5—Miscellaneous, Section 26 of the Payment Systems (Regulation) Act 1998;
(2) is bound to " ....inform the Government, from time to time, of the Bank's monetary and banking policy" under Section 11(1) of the Reserve Bank Act 1959 having regard to its obligations under Section 10(2) 'Functions of Reserve Bank Board' of Reserve Bank Act 1959 to "best contribute to.......... the economic prosperity and welfare of the people of Australia"; and
(3) holds authority under Division 4, Section 18 of the Payments System Regulation Act 1998 to set Standards that "are in the public interest" for a previously 'designated Payments System (under Division 2—Section 11 of the Payment Systems (Regulation) Act 1998 after having also imposed an Access Regime under Section 12
Between 1960 and 1980 Australia's 'central bank', the Reserve Bank, diligently regulated Australia's commercial bank interest rates relying on, inter alia, Section 50 of the Banking Act 1959 "......... to achieve monetary policy, public sector financing and sectoral assistance objectives.....", as well as safeguarding against further bank collapses (chronicled in Chapter 17). The RBA capped the maximum interest rate on Credit Cards in Australia at 18% until April 1985; OR
B. the Chair of ACCC as to whether particular aspects of Credit Card Issuers' marketing representations fall within the ACCC's definition of Unconscionable Conduct; OR
C. the Chair of APRA regarding his undertaking to a Senate Enquiry on 3 June that included:
"....the margins on credit card business look very high, certainly to any other form of credit, and certainly I can't sit here today with an explanation of why that is,"............ and ............ "Informing us all about that is probably a useful piece of work"? OR
D. the Chair of ASIC to inform what action ASIC took to protect Financially Uneducated And Vulnerable Credit Cardholders that have poor Financial Literacy Capacity, after ASIC published Report 224 "Access to financial advice in Australia" in Dec 2010 that included:
" ......... the ABS measured skills in document literacy, prose literacy, numeracy and problem solving and found that approximately 7 million (46%) of Australians (and 7.9 million (53%) of Australians aged 15 to 74) had proficiency less than the minimum required for individuals to meet the complex demands of everyday life and work emerging in the knowledge-based economy‘ for document literacy and numeracy respectively".
The UK Guardian article 'The interest-free credit card trap snaring unwitting borrowers' is rife with examples of UK Credit Card Issuers' Predatory Marketing directed at Financially Uneducated And Vulnerable Credit Cardholders that Lack Financial Acumen. There is a welter of evidence that U.S. Credit Card Issuers are not immune from similar Unconscionable Credit Card Advertising. One could presuppose: "Well why shouldn't it be any different in Australia?" It SHOULD be different in Australia, because Australia's 'central bank' has unique powers and exceptional responsibilities "...to.......... the economic prosperity and welfare of the people of Australia" and for its Payments Systems Board to always Act in the Public Interest, not held by the 'central bank' of the UK or the USA.
Below is an extract from Australia's Principal Regulator of the Payments System:
"The Reserve Bank of Australia's -
A. powers to gather financial information from ADIs under Part 5—Miscellaneous, Section 26 of the Payment Systems (Regulation) Act 1998; and
B. responsibilities to 'inter alia' "best contribute to.......... the economic prosperity and welfare of the people of Australia" in terms of Section 10(2) 'Functions of Reserve Bank Board' of Reserve Bank Act 1959 which includes -
" ....inform the Government, from time to time, of the Bank's monetary and banking policy" under Section 11(1) of the Reserve Bank Act 1959;to set Standards that "are in the public interest" relying on Division 4, Section 18 of the Payments System Regulation Act 1998 for a Payments System that it Designated on 12 April 2001 (under Division 2—Section 11 of the Payment Systems (Regulation) Act 1998; and
to re-regulate commercial bank interest rates relying on Section 50 of the Banking Act 1959 that "are in the public interest",
are more extensive/inflexible/onerous than the -
1. Bank of England, that was not nationalised as Britain's central bank until 1946, which is a corporation wholly owned by the UK government - the 'Corporate governance: Board responsibilities' – SS5/16 (Short form) focus on the Corporates it regulates with no apparent obligation to best contribute to the peoples of Britain; and
2. U.S. Federal Reserve that was established as the United States' central bank until 1913, although the below item 7. "Promoting Consumer Protection and Community Development." obligates the U.S. Fed to research the impact of financial services practices on consumers and communities:
"The Federal Reserve advances supervision, community reinvestment, and research to increase understanding of the impacts of financial services policies and practices on consumers and communities."
Australia's 'central bank' has never exercised its rights -
* under Part 5—Miscellaneous, Section 26 of the Payment Systems (Regulation) Act 1998 to ask for financial data from the major Credit Card Issuers of Interest & Penalty Fees revenue for each of their Credit Cardholders for all Credit Card Products for a minimum of 12 months in order to establish if the User Pays Principle applies, notwithstanding that the RBA argued for greater application of the User Pays Principle in its paper "Reform of Credit Card Schemes in Aust: "A Consultation Document" in Dec 2001; or
* 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" having regard to its obligations under
Section 10(2) '
* the RBA recommended in Dec 2001; and
* the Writer recommended in Section 8 of his letter (on CD) to the RBA dated 8 Dec. 2011 - explained in Point 9 of Supporting Evidence re 1st Question.
References to this Submission:
A. Three Pivotal 'Landmark' RBA Published Papers in the last 26 years
B. The Writer's CD submission to RBA sent 8 Dec 2011
C. Over 550 Documents and Defined Terms
Parliamentary Acts, MoU's and RBA Credit Cards Regulatory Decisions relied upon in this Public Submission
* Banking Act 1959 - Banking Act 1959 (222 pgs)
* Reserve Bank Act 1959 - Reserve Bank Act 1959 (57 pgs)
* Payment Systems (Regulation) Act 1998 - Payment Systems Board Act 1998 (33 pages)
* APRA Act 1998 - APRA Act 1998 (72 pgs)
* Australian Securities and Investments Commission Act 2001 (394 pgs)
* Competition and Consumer Act 2010 (544 pgs)
* Memorandum of Understanding - Australian Competition and Consumer Commission and Reserve Bank of Australia dated 8 Sept 1998
* Memorandum of Understanding - Australian Prudential Regulation Authority and Reserve Bank of Australia dated 12 October 1998
* Memorandum of Understanding - Australian Prudential Regulation Authority and Australian Competition and Consumer Commission dated 30 November 1999
* Credit Cards Regulatory Decisions by the RBA
Primary Sections of Acts relied upon:
· Section 50 ‘Control of interest rates’ of the Banking Act 1959
· Section 10(2) 'Functions of Reserve Bank Board' of Reserve Bank Act 1959
· Division 2—Section 11 of the Payment Systems (Regulation) Act 1998
· Division 3—Section 12 of the Payment Systems (Regulation) Act 1998
· Division 4---Section 18 of the Payments System (Regulation) Act 1998
Declaration that the Writer is not conflicted
Yours sincerely
Thirty Questions and Supporting Evidence
|
CLICK ON BELOW
QUESTION |
Question |
Issue/Problem/Negligence/Discrimination 'et al' |
Number of Supporting |
|
Royal |
Will the Royal Commissioner request financial data from primary Credit Card Issuers of the sources of Interest And Penalty Fees Revenue to test the Writer's calc that Persistent Revolvers (account for 12.58% circa of 7,515,000 Credit Cardholders - June 2016) contribute 80 circa of all Interest And Penalty Fees Revenue? |
14 |
|
|
Governor of the Reserve Bank |
Why did the Reserve Bank published LOAN RATE STICKINESS: THEORY AND EVIDENCE in June 1992 and never act upon its 'sticky' findings re the plummeting Overnight Cash Rate? |
12 |
|
|
Governor of the Reserve Bank |
What
did the Reserve Bank hope to achieve from publishing Why hasn't the RBA 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? |
9 |
|
|
Governor of the Reserve Bank |
Will the Reserve Bank set a new Standard, pursuant to Division 4 Section 18, to replace the debt 'lure' of an Interest Free Period with a - * Concessional Interest Rate Period; and for each Purchase with a Credit Card, 'so that each user pays' for the benefits of a Revolving Line/s of Credit? |
2 |
|
|
Governor of the Reserve Bank |
Does the Governor of the Reserve
Bank agree with the former Assistant Commissioner, Dr. Malcolm Edey's,
below response to a question from the Acting Chair of the
Senate Economics Legislation Committee
on 1 June 2015? |
2 |
|
|
Governor of the Reserve Bank |
Does the Governor of the Reserve Bank concur with the 1st paragraph on page 3 of Senate 'Economics Reference Committee' summary report titled Interest rates and informed choice in the Australian credit card market dated Dec. 2015 which justified Dr. Edey's response (listed in Question 5) which asserted that the ACCC is responsible to monitor and regulate credit card interest rates, even after the RBA had Designated, established an Access Regime and Determine a Standard/s, thereby inheriting the ACCC's responsibilities? |
3 |
|
|
Governor of the Reserve Bank |
Does the Governor of the Reserve Bank agree with Dr. Malcolm Edey's below responses to the Senate 'Economics Reference Committee' on 1 June 2015?
|
5 |
|
|
Governor of the Reserve Bank |
Is the Governor of the Reserve Bank in possession of empirical evidence that supports Dr. Malcolm Edey's contention (in Dr. Edey's responses to the Acting Chair of the Senate 'Economics Reference Committee' on 1 June 2017) that a viable opportunity exists for Credit Cardholders that have managed to 'chalk up' considerable debit, often across several Credit Cards, to consolidate those debts in a zero or introductory low interest rate Credit Card to ".... pay off their loans more quickly"? |
4 |
|
|
Chairman |
APRA
Chairman
responded to
a Senator Hearing in Canberra on 3 June 2017
"....the margins on credit card business look very high , certainly
to any other form of credit, and certainly I can't sit here today
with an explanation of why that is,"............ and ............
"Informing us all about that is probably a useful piece of work".
|
8 |
|
| 10th |
Governor of the Reserve Bank |
Has the Governor of the Reserve Bank who is the Chair of the Council of Financial Regulators, and co-wrote LOAN RATE STICKINESS: THEORY AND EVIDENCE in June 1992, ever discussed with the other two members of that Council, namely APRA and ASIC, the RBA informing the Government, pursuant to section 11(1) of the Reserve Bank Act 1959, of the need for the RBA, pursuant to section 50 of the Banking Act 1959, to re-regulate a maximum interest rate for Purchases and for Cash Advances due to the burgeoning gap between the Overnight Cash Rate of 1.5% and interest rates charged on low interest and on high interest Credit Cards that peak at 29.49% for a Cash Advance using a Latitude Financial "Go MasterCard"? |
8 |
|
Royal |
Will the Royal Commission recommend to the Chair of the Three Financial Regulators to provide Minutes of their quarterly meetings. |
7 |
|
|
Governor of the Reserve Bank |
Is the Board of the Reserve Bank
which is chartered under
Section 10(2) ' |
3 |
|
|
Chairman |
Will the Chair of ASIC that is bound by Part 1-Preliminary Division 1 Objects of the ASIC Act 2001 to -* "improve the performance of the financial system and entities in it; and * " receive, process and store, efficiently and quickly, information that is given to us",inform what action ASIC took to protect Financially Uneducated And Vulnerable Credit Cardholders that have poor Financial Literacy Capacity, after ASIC published Report 224 "Access to financial advice in Australia" in Dec 2010? |
1 |
|
|
Chair of Council of Financial Regulators |
Will the Chair of the Council of Financial Regulators provide to the Royal Commission a schedule of the respective responsibilities of the RBA, APRA and ASIC (and the clauses relied upon in their respective Acts listed at the top of this letter), that satisfy the 'Terms of Reference' and 'Statement of Expectations' required under the PGPA Act, that obligates each regulator to ensure competition amongst Credit Card Products which involves seeking information to establish that Credit Card Issuers are not engaging in Numeracy And Literacy Discrimination through Unconscionable Credit Card Advertising targeted at Credit Cardholders with low Numeracy and Literacy Skills? |
5 |
|
|
Governor of the Reserve Bank |
Will the Governor of the Reserve Bank inform why its Payments System Board's 'Responsibilities and Powers webpage does not also list the Banking Act 1959 under legislation that governs the Payment Systems Board's responsibilities and powers? |
1 |
|
|
Chair of Council of Financial Regulators |
Will the Chair of the Council of Financial Regulators inform if it sought financial data from the primary six or seven Credit Card Issuers, that includes those issued by Citibank and Latitude Financial (nee G.E. Capital), that identifies the number, Outstanding Indebtedness and demography of Credit Cardholders that are Persistent Revolvers after the RBA quantified in Graph 7 of RBA Submission to the Senate Inquiry into Matters Relating to Credit Card Interest Rates - Aug 2015 the indebtedness borne by Persistent Revolvers? |
3 |
|
|
Chairman |
Will the Royal Commission ask the Chairman of the ACCC, Mr. Rod Sims, to examine the information in advertisements for Credit Cards (explained in the Nine Examples within Labyrinth of ‘Concealed Spiders’), with particular regard to obligations under the National Consumer Credit Protection Amendment (Home Loans and Credit Cards) Act 2011, to determine if any represent Predatory Advertising, ipso facto Unconscionable Conduct (based in the ACCC's description of Unconscionable Conduct)? |
2 |
|
|
Chairman |
Will the Royal Commission ask the Chairman of the ACCC, Mr. Rod Sims, if the 'Conditions of use' booklets issued by St. George Bank, ANZ and Westpac (summarised in table in Chapter 1) with text in small fonts constitute Unconscionable Conduct? |
3 |
|
|
Royal |
Will the Royal Commission recommend to the Three Financial Regulators that they use their existing regulatory powers to require all Credit Card Issuers to simplify their Credit Card Products so that their Credit Cards 'Conditions of Use' booklet, together with any Schedule/s referred to therein, do not exceed - (a) 50 pages in text no smaller than Arial 10; and (b) the existing height and width of the booklet? |
4 |
|
|
Royal |
Does each of the Four Pillars reducing their low interest credit card by 5% circa in recent months, amidst the prospect of a Royal Commission, evidence that the Four Pillars that issue 80% of Credit Cards used in Australia, were uncompetitive during the Council of Financial Regulators 'watch', when each of the RBA, ASIC and APRA have regulatory obligations to the Australian public to ensure real competition amongst Credit Card Issuers, under Section 10(2) 'Functions of Reserve Bank Board' of Reserve Bank Act 1959 to "best contribute to.......... the economic prosperity and welfare of the people of Australia" and for the Payments Systems Board to always Act in the Public Interest? |
4 |
|
|
Royal |
Will the Royal Commission recommend to the Three Financial Regulators that they use their existing regulatory powers to ban Reward Programs? |
6 |
|
|
Royal |
Will the Royal Commission recommend to the Three Financial Regulators that they use their existing regulatory powers to ban Credit Card Issuers paying third party credit card websites (finder.com, canstar.com.au, iselect.com.au 'et al') to market/advertise/promote/recommend in any way, shape or form their Credit Card Products because such advertisements are often misleading and deceptive and targeted at Credit Cardholders with low Financial Literacy Capacity as classified/quantified by the Productivity Commission and the ABS? |
3 |
|
|
Royal |
Will the Royal Commission recommend to the Three Financial Regulators that they use their existing regulatory powers to ban any Credit Card Issuer offering Balance Transfer Interest Free or Very Low interest introductory offers which 'poach' profitable Financially Uneducated And Vulnerable other bank Credit Cardholders because Persistent Revolvers that Lack Financial Acumen contribute 80% circa of all Interest and Penalty Fees Revenue generated from Credit Card Products? |
8 |
|
|
Royal |
Will the Royal Commission ask the ASIC chairman, James Shipton, why ASIC made the following statement in ASIC's Submission to the Productivity Commission Inquiry into competition in the Australian financial system - Sept 2017? |
1 |
|
|
Royal |
Will the Royal Commission recommend to the Governor of the Reserve Bank that it provide to the House of Representatives in the Commonwealth Parliament an annual written 'Statement on the Conduct of Monetary Policy' which includes, inter alia - A. an annual written 'Report on the Profitability of Credit Cards'; and B. certifies that Visa and MasterCard separately complied with the two weighted-aver age Interchange Fee benchmarks, including 'companion cards', during the relevant year, namely 0.50% for Credit Cards and 8 cents for Debit Cards? |
3 |
|
|
Chair of Reserve Bank Board of Directors |
Will the Royal Commission ask the Board of Directors of RBA to declare their aggregate - * Annual Cardholder Fees paid; and * Interest Costs paid, by the eight members in the 12 months to 30 June 2017 for enjoying the convenience of the Lines of Credit provided by their personal Credit Cards? |
1 |
|
|
Governor of the Reserve Bank |
Will the Royal Commission ask the Governor of the Reserve Bank what investigations the Reserve Bank has undertaken with Credit Card Issuers, the three Credit Reporting Agencies, Financial Counsellors and Credit Card Distress Authorities to understand the number of Credit Cardholders that are experiencing Extreme Financial And Emotional Distress and the various financial quanta of that distress? |
7 |
|
| 28th |
Governor of the Reserve Bank |
Will the Royal Commission ask the Governor of the Reserve Bank what the Reserve Bank has done, and when it did it, to ensure that Credit Card Issuers do not issue further Credit Cards to applicants that are experiencing Extreme Financial And Emotional Distress due to already having been issued several Credit Cards? |
7 |
| 29th |
Governor of the Reserve Bank |
Will the Royal Commission ask the Reserve Bank to draw upon its existing Extensive powers to establish a Standard for a 'Uniform Credit Evaluation Methodology' that all Credit Card Issuers must observe similar to NAB's Microenterprise Loans because too many Australian adults have obtained Credit Cards with excessive interest rates which would be lower if the payment defaults were lower due to a robust designated 'Uniform Credit Evaluation Methodology' that all Credit Card Issuers observed? |
7 |
|
Governor of the Reserve Bank |
Will the Royal Commission recommend that the Reserve Bank set a new Standard, pursuant to Division 4, Section 18, that requires all Credit Card Issuers to issue a 'Provisional' Charge Card to any applicant that has not previously held a Credit Card? Any such applicant, invariably school leavers, would need to repay the entire Closing Balance by the Payment Due Date for a minimum of three months, prior to being issued with a Credit Card? |
2 |