Click on Thirty Two Written 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 Payments 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;  and/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 2017 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"? and/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:

E.      the CEO of the ABA because the ABA, some 30 years too late, has .

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 the Writer's page titled 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."

Below are extracts from Reserve Bank of Australia Bulletin  -  July 1998 - Australia’s New Financial Regulatory Framework that chronicles the Reserve Bank's powers, set out in the Payment Systems (Regulation) Act 1998, that allow the Reserve Bank to undertake more direct regulation of ‘designated’ payments systems to –

"... promote competition in the market for payments services, consistent with the overall stability of the financial system..." when it judges it to be "in the public interest" which may involve the imposition of access rules or operating standards for participants in such systems:

"The new Payments System Board is responsible for the Bank’s payments system policy, the objectives of which are:

•     controlling risk in the financial system arising from the operation of the payments system;

•     promoting the efficiency of payments systems; and

•     promoting competition in the market for payments services, consistent with the overall stability of the financial system.

The Bank’s powers in this area, set out in the Payment Systems (Regulation) Act 1998, allow it to undertake more direct regulation of ‘designated’ payments systems when it judges it to be in the public interest. This may involve the imposition of access rules or operating standards for participants in such systems. The Act also provides a framework for regulation of purchased payment facilities, such as travellers cheques and stored-value cards."

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) 'Functions of Reserve Bank Board' of the Reserve Bank Act 1959  to "best contribute to.......... the economic prosperity and welfare of the people of Australia", to set new Standards under Division 4, Section 18 of the Payments System Regulation Act 1998 to re-regulate a maximum Purchase interest rate and a maximum Cash Advance interest rate after it published LOAN RATE STICKINESS: THEORY AND EVIDENCE in June 1992 to adopt other User Pays Principle fee changes that -

          *        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 Regulatory Authority and Australian Securities and Investments Commission dated 8 Oct 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

*          Memorandum of Understanding  -  Australian Securities and Investments Commission and Reserve Bank Of Australia dated 18 March 2002

*          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

·         Section 11(1) ‘Differences of opinion with Government on questions of policy’ of the 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

Philip Johnston