We Aussies are an apathetic lot.We complain about Govts,price of fuel and bank rip offs,yet don't develop strategies to combat them.

Firstly develop a long term memory for what is important and be constantly aware how to punish the poor behaviour of our banks.

Be pro-active,complain and vote with your feet.If it is too expensive to move your mortage,move your bank account and let them know why in writing.

Shop around.There are Credit Unions and personable banks like the Bendigo who on average have lower fees and better service.

It is about time we as a nation had a bank with no share holders and thus the account holders benefit by low interest rates and charges.Mutual societies run well,are a real solution to these share holder rip offs.

So if your really angry about the having to pay for the poor decisions of banks in investing in the sub-prime debacles in the US,do something about it and let them know why.If you don't,then at some time in the future expect to be screwed again.

Hi Arjay...

I did look into the 'Bendigo'...but found they had a sneaky little high charge on ATM and I think Eftpos transactions.

A "PEOPLES BANK"....is something which would address the problem.

If a government or.. community run bank uses the same yardsticks of sound management.. proper security measures..that are needed to be viable, but charges only enough interest and fees to cover bad loans (which should not exist if they take appropriate security) then we all could have much lower and more friendly finacial options.

I wonder how much of bank profit is based on 'interest' and how much on 'fees and charges' Not to mention the huge salaries of their executives?

When their after tax profits are in the BILLIONS... this would be worth knowing.

Of course the best thing is "owe no man anything, except to love one another" (Romans 13:8)

But try to tell teenagers that saving now will mean much better things later. Nope..they mostly want to enjoy life.
Out of my 3, I've managed to convince one, my last that saving now is the best thing, but he still went out and bought (groan) GTA for his Xbox... hmm serious counselling in overdue I reckon :)

Many of the Major Bank core systems date from the 1960s-1970s. At Westpac when I was there was to cross-sell not merely to gain business but to make it difficult to close multiple accounts, knowing the consumers release all the Banks are as bad as each other.

As with Petrol Stations, We consumers should target one Bank for demise. Remember the bus company and Martin Luther King's campaign.

Also, when the Bank makes an error complain the ACCC, Section 52 covers a host of sins. Why not charge a fee for re-issuing cheques "lost in the systm": A large branch has two or three of thes each day.

Pressure government to cut down the [cheque] exchanges between Banks from three days to one day.

Ask the ATO value re-value some the Banks main offices, depreciated over the decades.

With depsot accounts, consider actual bonds/inscribed stock instead of IBDs/Term deposits. Seek legal advie if a Bank overdraws a Trust Account. Whem taking legal action direct it to the "home" of the director. Chech with a Chamber Magistrate first [I have done this myself, different industry, though].

If you have a good credit record and a check is returned "Refer to Drawer" not "Present Again". Seek legal advice.

If you make a slip up with your payments and get charged a fee, another good thing to do is just to keep ringing up the bank to use their customer service resources.

I like to ring them up just to have a chat, and tell them I'm just getting some value for the money they charged me.

I find it ASTONISHING that ANZ for example advertise an account with a $5 a month charge for 'fee free transactions'. Just who is stupid enough to pay a bank $60 a year for the privilege of letting them hold your money, and why is this something for the bank to advertise as the major selling point of a great new product! You'd think ANZ would keep real quiet about that. I think it's a good definition of pure arrogance.

Hi Arjay,

As you probably already know, I agree inaction and apathy is the greatest enemy of getting real outcomes.

Anyone who is interested in taking a few seconds to find a voice can sign the petition to the treasurer here:

http://www.matesratesmortgages.com.au/mates-rates-mortgages-hot-news/2008-05-06-mortgage-relief.html

If you get a sec, why not add your thoughts to the mortgage discussion thread here:

http://forum.onlineopinion.com.au/thread.asp?discussion=1770&page=1

Usual Suspect,

If you feel the advertising is misleading you can take a director to the Consumer Affairs Tribunal for adjudication. Even if you loose you will have ruined at least haf of their day. Cost is nominal.

If you win and establish a judgement debt, garnishee Australian bank's international currency [Vostro Account] with Bank of England, London. Apart from embarrassment, there will be a debit with no correstonding credit. A reconciler's nightmare for this style of account.

Relatedly, purchase a foreign currency for nominal amount say $2 and tear it up. It will never be reconciled, as these drafts unlike Oz Bills of Exchange never go stale. It will remain there for decades.

Of course I would never reccommend it and in fact I discouage it: But one peaved Bank customer put a dead fish into a safe-custody box!

O.

Gidday Oliver,

I doubt the advertising had anything less than the fullest and most detailed disclosure to comply with the law aka win them with a headline and bury it in the disclosure. As has been quoted elsewhere "A reliance on disclosure as a primary consumer policy tool has failed..." And the mechanisims for enforcement are even worse....

As for the dead fish, whilst I could never condone it, what a refreshing idea.

I like some of the the more creative solutions like the dead fish,but that only affects the workers who have no say in policy decisions.

In the near future due the the present financial crisis,we could see bank mergers worth $65 billion.This will serverly limit competition,and we could see a Coles/West Farmers market,whereby the big boys elect an unofficial price or interest rate which they will not go under.It is unofficial price fixing which is almost impossible for bodies like the ACCC to prove.

We have reached a point in this country where the wealth is far from being distributed evenly,and increasing taxation on the dwindling middle class,will not address it.

Greeting mortgageinsider and Arjay,

Arjay, I agree that one should do everything that is goung to be hardful or sickening to the innocent staff. I really would not do the fish: Just sharing: It did happen.

I don't know the situation now but the Banks did collude at at the level below GM about interest rates but the system work that the lead Bank [Westpac, now NAB?] set the rates and the others would the following week. It takes a few days to clear things with legal, sign of the advertising, place notifications in the staff circulars and build the intrest table that is read by the Bank's computer programme. While I would recommmend rate some models were first produced by the National Manager, Retail Lending, I reccommended the changes, the Chief Manager of the Commercial Bank parsed these for implecations on the Corporates [usuall change one rate feel a part of things ;-). The GM approved. So the authority process is model, analyze, recommended (me, funding side), support and approve. It was above board.

Disclosure that is an interesting when computer systems change sometimes mistakes are found that require reporting to the RBA for exanple FID abd BAD. Remember these? The Board reduce the amount calculated by the investigation acturial and report a reduced/lower figure to relevant. The authority believing the Bank had been upfront and honest about voluneering the information guaranteed say the RBA auditors wouldn't question their ethic. I reproted this twice to a police hotline and was ignored.

The TPA [ACCC] is very powerful, especially Section 52, which deals with goods being "fit for purpose" in "trade and commerce". Say if a Bank didn't close your credit card account after three requests and you have records of the same, I suspect it would be a breach.

More mortagages later. But I don't feign knowledge I don't have, as it was a long time ago and the other side of the Bank's balance sheet.

Best regards.

After a re-read:

"In the near future due the the present financial crisis,we could see bank mergers worth $65 billion."

And centralisation of the control of trillions dollars in superfunds and deposits. The capitalisation is just the tip of the iceberg.

In 1993 or 1993 the shareholders voted no confidence in the Westpac board saying it was they and not the ececutive management that results in four (really was six) billion dollars in bad debts. Westpac had a common direct and voted the proxy of the insurance, nominee and unit trust it holds. Actually, I feel there should some form regulation here.

Chers,

O.

Go for the credit unions. In SA, Wespac is poised to gobble up a few more banks, including Bank SA, which has already been gobbled up by St. George. Now it's St. George's turn.

What is to stop a bank advertising an interest rate of about 6%, then routinely adjusting it to 8.5% immediately after they have sold the product?

I suppose what I am asking is do they have to make interest rate changes accross the board? i.e when a bank lifts rates due to sub-prime, can it just change the margin on a subset of it's products? Possibly the ones that haven't been around for very long and have a 4 year deferred establishment fee and penalties? Or do they also have to lift the rate on the customers who would more likely leave?

I remember Paul Clitheroe saying years ago to enjoy the credit unions while they were still the good guys, because as they picked up more and more bank customers, they would become more 'corporatized' and go the same way.

He was right. The worst experience I ever had was with the largest credit union (in SA!) that went from being the best to the highest fee charging CU. in SA., under a Board...no! best not say anymore.
Even certain staff were arrogant and nasty. it was without doubt, the worst experience with a financial institution that I have ever experienced. Things were so bad that they had to bring in security guards to the AGM's, because people (inclusive of!) were getting on to the Mic and asking them just what the hell was going on.

I got such a run-around on one occasion that I sent them a hand-written account for all the phone calls;- they paid it!

I moved back to a bank,-and have had no further problems.................; until now? That bank is a subsidiary of one of the biggies in the merger.

Watching. Waiting.

Usual Suspect,

Yes it is possible for the banks to attract you on one rate, then jack the rate up the day after your loan settles if it is a variable rate loan.

Not only is it possible, it happens. It is known in the industry as 'holding back'. If there are enough complaints, ASIC acts, but for the most part, borrowers cop it on the chin. When ANZ launched their non-bank solution called One Direct, they, and another non-bank lender were cautioned by ASIC about this deceptive practice. If you’re interested at all, you can read up on it here:

http://www.asic.gov.au/asic/asic.nsf/byheadline/06-388+ASIC+warns+lenders+about+misleading+ads+on+interest+rates

It is truly dodgy. Holding Back, along with many other questionable practices happen regularly without any backlash whatsoever. Unless the borrowers have the right helper on side, they often don’t even know they are being ripped off.

If the rate is variable, lenders can do what they like. Each lender responds individually based on what they think is right or what they think they can get away with.

Certainly some lenders have absorbed the increased cost of credit on some products, whilst passing it on for others. Similarly, some lenders have protected existing customers from increases and only passed increases on to new customers, however sadly, it is more often the reverse.

M

We truely need a a bank that is owned by the account holders.Banks in reality produce nothing.The RBA in conjunction with the World Bank creates the cash to match real economic growth.This makes them the gate keepers who capitalise on the hard work and creativity of others.

If the banking system was truely intelligent it would not have fallen for the sub-prime debacle in the US.If Banks cannot do the job that is defined by their charter,ie create stability and fairness in the financial system,then ordinary folk need to develop a system that is in their best interests.

We need a bank that is independant of both Govt and the greedy big boys.

I hate to disappoint you Arjay, but you have just described a Credit Union.....

*We truely need a a bank that is owned by the account holders.*

That is probably already the case Arjay, for the big shareholders
in banks are in fact the super funds, who hold those shares on
behalf of Australian workers, as part of their super funds.
So if they screw you, you get it back in your super fund account.

Personally I found the best way of getting even with the banks was
to save my pennies, buy some bank shares and then let them send
me a cheque twice a year!

Australian banks can't really be blamed for the subprime crisis,
they are just caught up in it. I note the St George are paying
around 8.5% on money borrowed from Japan, then lending to housing
owners at 9.5%, not exactly a ripp off.

Does anyone have any idea of how much interest a Credit Union or.. any body would need to charge in order to pay its staff a reasonable salary?

Do Banks make most of their money from interest....or fees and charges?

Once we know these basic facts, we can then move to consider a solution and how attractive it might be.

any info is welcome.

Yabby,

Spoken like a true shareholder. Certainly whilst investing in bank shares is a way of accessing bank profits, for whatever reason, it doesn’t work for everybody. Putting that aside, your Japan example is completely misleading.

Whilst your example looks like a low margin solution, there are a myriad of sources for funds and equally, a number of finance products that St George offer. For example, I notice their HIGH INTEREST savings account pays the customer 7% neat, yet their low rate credit card is charged to the customer at 12.99%. Of course other savings accounts are lower and other credit cards are higher, but the 1% markup (around 11% margin) is farcical. Taking the more realistic example I have offered, poor St Georges margin is more like 85.7%!

That also completely discounts revenue and profit from fees. St George has hundreds of them.

Amongst the questions raised here is the one of social responsibility of banks. Unfortunately during the 1980's, the push started to privatise the Commonwealth Bank, which at the time, belonged to the people. On 17th July 1991, CBA ceased to be a statutory body and became a public company. This created an asset that was able to be sold and drove the last nail into the coffin of large scale, socially responsible banking. This made it about profit.

Whilst CBA continue to exert a strong and positive competitive influence in the market, the eternally unanswered question is whether they would have or could have been a more effective social tool if we maintained ownership as a country.

Credit unions can and will never compete with banks whilst the market stands as it is. They simply do not have the scale and this affects them on any number of levels, whether it is infrastructure cost, diversity of services, or the ability to offset risk - and the list goes on. The creation of a mega-credit union may be possible through consolidation, however on the whole, credit unions are a parochial lot and this really challenges the concept. (Although the debate and idea should not be abandoned).

mortgageinsider

mortgageinsider,

Thanks for the link, I suspected as such. Maybe a law that all products must be linked by a fixed amount to the banks standard variable rate would tie the banks hands a bit more?

One more stupid question. Where does the money go in this 3 days to clear a cheque, or electronic transfers that you set up and only appear on the electronic statement about 24 hours later. Are the banks robbing you of interest in the process, and is it the departure or destination bank that gets the free ride? Is the dpearture bank a fraud when it says the money has left your account, or is the destination bank just not showing it? I don't understand this black hole.

MI, I remind you that virtually all working Australians are bank shareholders,
as the share registry of our big banks shows. Nearly all super fund money, on
behalf of workers.

Back in the days when the CBA was Govt owned, the bank spread was around
4%, its declined to around 2.5% through competition. In other words, when
the Govt owned the CBA, the Govt ripped you off.

Anyone can buy and own bank shares. I actually learnt this little lesson from
one of my 17 year old employees. Whilst her friends bought clothes and cds,
she saved her pennies and bought Westpac shares in the early 90s, for around 3$
each. If a 17 year old kid straight from school can do it, anyone can.

Where our banks have a problem is that because of our tax system, Australians
are bad savers. So banks have to borrow about half of what they lend out, from
overseas sources. Their cost of funds is a lot higher then what they pay for
retail deposits. As that cost rises, there is now more competition for retail
deposits. You can easily obtain 8% on your money right now, in a very
competitive market.

Sure banks make extra money on credit cards. But then its mug consumers who
get sucked in by not paying off their credit cards in time. I call it the spending
gene, some just can’t help themselves and do without for a while.

Why should I feel sorry for BD etc, if he has bought a large chunk of land in
suburbia, which he might one day sell to developers, as his land increases
in value by an enormous amount?

Frankly I would rather have healthy Australian banks, then banks on the verge
of going bust, due to lack of profitability. If that was the case, overseas investors
would be charging them 16-17% interest for funds, not 8.5% as now.

Usual Suspect,

It would normally take only one day for a between banks cheque to clear the exchanges. They keep the float. When living in Singapore, I was surprised and a little embarrassed, because a Singaporean cheque in favour of Australian American Express "Charge" Card" paid in Singapore, to our Australia took seven days to clear in Singapore, [In reality, electronically a day, I suspect]and a further three days process to Australia. As a result we missed the due date and needed to explain to Amex in Oz what happened.

[We just arrived bank in Australia they rang both me and my wife for our Amex numbers, same account, but different numbers; they double billed us. When asked what about the interest I was told they don't pay interet for "their" mistakes. I guess I push it legally. The points being double billing and not correcting it must be bordering on fraud. If they do this 100,000 times those penny mistakes add-up to a large sum.]

The Exchanges issue has been around for decades. At Westpac other banks' cheques went into what is called "bin eight". Bin Eight cheques were exchanged that night, after business ours. The next business day, the payees' banks have the cheque in possession. It could be posted that day unless banks' still use mechanical readers and there is damage to the MICR line.

O

Arjay and friends,

The polies will just shelf the petition with all the others. It would be better to receive a ruling on the legality of your proposal from the Attorney-General for adjudication. Write in a cooly worded style, one or two pages at the most and request a reply.

If the legals are okay, write to the to the Treasurer attracting the A-G's response, while emailing all members of parliament.

I've looked though my old textbooks from Institute of Bankers exams, but that was in the early eighties and the info. could be too old.

One would need an organisation and several person-weeks to organise a major rally or a "Bash the Banks Day". Say having 100,000 people cancelling their periodal debts and paying their instalments on a toilet roll core drawn on a deposit account: It is valid provided the conditions for drawing a Bill of Exchange are met. It might require a duty stamp, is applicable in your state.

Small numbers, the Banks would try to retort to the parties behaviour with anti-vexatious behaviour actions. It would require large numbers and media to ensure the public and courts would see it as a full-on Public Protest.

Gidday Yabby,

I don’t need reminding, I just ignored this part of your comment. Your concept that every working Australian is a bank shareholder is absurd. There is a very real difference between being a shareholder and having superannuation with a fund that is an institutional investor in a bank. Think direct voting rights, sale rights, dividend distribution rights et al. Either there are some concepts that 17 year old girl didn’t teach you, or you are deliberately trying to pull the wool.

Unlike your St George example which was also misleading, I can't easily confirm your accuracy on the CBA margin or more importantly, how it compares to other lenders in the snapshot you have written about.

Regardless, I absolutely agree that competition from deregulation pressured banking margins. Your observation is timely and very important. However my point was more about privatisation. For better or worse, CBA ‘profit’ was controlled by and directed to the government. Unlike you, in the ideal, the government governs for the people, not the individual.

Whilst I share your view that banks need to be sustainable. The questions for us as a society are, how profitable and at what cost?

As for your chance lesson from a 17 year old girl, it’s great that this completely luck based event lead you to such a satisfying investment strategy for yourself. Imagine where you could be, if you had not met this switched on lass or she had instead suggested to you to buy a large chunk of land in suburbia, which you might one day sell to developers for an enormously increased amount.

Your apathy and disregard for those who have not been so lucky is distasteful and, I suspect, at the heart of this issue of all those like you. Success, knowledge and intelligence are the poor cousins to compassion, empathy and decency. Fortunately for some, they are not mutually exclusive.

Mortgageinsider (Mick)

Wayne Swan, prior to the budget, suggested the government might introduce laws to make it easier for customers to change banks without incurring fees hence making the changeover relatively easy and painless. This was with the aim of making banks more competitive again and reducing the strength of the monopoly. Would it work? I don't know but the cynic in me thinks the banks would just collude more to reduce choice each becoming a pale carbon copy of the other.

Anyone know the status on this proposed policy? Is it being seriously looked at?

We always question ridiculous charges on our accounts such as the annual fee to retain our Rewards Visa (two cardholderss but on one account) so charged twice ($80 total) for the honour of having the Visa. We went into to cancel the Visa because of the charges and they bank refunded the charge. Next year same story and had to do it all over again. It is laughable.

We would move to another bank but many are worse and there is always the risk of some new charge rearing its ugly head in the future?

Yeah it amazes me why nobody seems to shop around. When ANZ decided for me and my partner to have a VISA card with rewards should cost $165 a year, while rewards were capped at $3500 spending a month, I found Earth Card at $40 a year where rewards aren't capped at all.

I even mailed ANZ and asked how they could possibly compete and they didn't reply? Same as I said earlier about advertising a $5 a month current account. Are people hypnotised by the ANZ blue? To me it's like ANZ saying, 'Hey Look! Our product is a complete rip off!' And the customer saying 'Oh, yes it is. Can I sign up!'

I suppose it's like people paying for Big Pond ADSL at $65 with 400Mb (Unlimited they call it) download limit.

The Australian Banking system is a shameless cartel.

I defy anyone to point out a significant difference in charging policy between any of them. They increase their rates in harmony, they collude on the length of time it takes to clear a cheque (when in fact, the transaction is electronic and instantaneous), they find new ways of gouging fees, and implement them like so many Olympic synchronized swimmers.

On the topic of cheque clearance, I deposited a (sizeable) cheque into my company's account on a Thursday, noting not only that i) both parties to the transaction used the same Bank, but that ii) the payor's account was actually at the very Branch where I lodged the cheque.

The funds were not available to my company until the following Wednesday.

I was particularly incensed by this, especially having been a customer both business and personal for twenty-plus years, and got onto the phone to other Banks, to see if they wanted my accounts.

Every one of them stated that they would have done the same.

Apart from the basic iniquity, where the Bank has free use of these funds for five days, when they had control over both sides of the transaction, the sheer bare-faced cheek that they can all collude in this theft is the most shameful part of it all.

We put up with it only because we don't have a viable alternative.

MI, why is my concept absurd? At the end of the day, most bank profits land up
in the accounts of super fund members, which means nearly all workers in
Australia. You are free to change super funds, (most people are) You are free
to run your own super fund, you are free to tell your super fund what you think
of the shares that they buy. If you really feel so strongly about voting, so buy
2 shares and go to the bank AGM.

The St George example was not misleading. Most of their money is lent for housing
loans around 9.5% and that money is costing them more these days, the last few
hundred million cost them 8.5%, as they don’t yet have as good a rating, as the
big four. Last time I looked Bendigo was worse, at BBB, so overseas funds
would be even more expensive for them. That is exactly why the mortgage providers
are baling out, as there is a flight to quality.

*Unlike you, in the ideal,
the government governs for the people, not the individual.*

Hehe, you must be kidding. Everyone is busy furthering their little patch of self
interest. Politicians do what might get them reelected, public servants do enough
to hang on to their safe and cushy jobs. Give them a monopoly on banking or anything else, they will do what people do in that case, spend a lot of time looking
out the windows, watching the cars go by. That’s why we need competition.

For my personal accounts I play one bank against the other. In my experience everything is negotiable these days with banks. In one account, they clear all
cheques in a day, the other account takes 5 days. Neither is really a drama to me.
What I have learned is don’t ask the teller, she just parrots what she has been told.
If you want a deal, go to the manager or his/her superior, who can actually make
decisions.

Gail Kelly is known for improving consumer service, so I’d say that things will
improve dramatically at-Westpac.

Hello Pelican,

I think that it is extremely unlikely that Wayne Swan has made any progress on home loan exit fees as I think these are sound bites rather than an intended policy.

In the extraordinary event he makes any progress, the most likely outcome will be for lenders to blend the cost into some other part of the loan, either by amortising into the rate, adding it to ongoing fees or pitching it into the setup costs or combinations of all of these.

There is another gobsmacking aspect that Swan’s does not address and that is the establishment cost of the loan that borrowers want to refinance out of. Many of these charges are not included in comparison rates and buried deep in disclosure, so borrowers either don’t really notice them, or pick them up when it is too late. A classic significant cost is Lenders Mortgage Insurance. This mostly non-refundable premium often makes exit fees pale in comparison, as it is regularly $3,000 - $4,000 and because it’s non refundable and non transferable, when you switch lenders, you write that money off.

There is a plan that helps ease these costs as well as reduce interest rates on residential mortgages that has been sitting on the governments desk gathering dust since 2007. Swan has a copy and has done nothing. There is now a petition to build pressure for the government to respond, which I linked to early in this discussion. I haven’t relinked it here, because I am not sure if doing it again breaks the rules.

Anyhow, I did start the thread and I hope you take time to find it, sign the petition and spread the word.

Thanks

Mortgageinsider

I seem to recall keating wanted to lend some billions of money [no worries said the commonwealth bank 4 percent fixed]

No replied the privatly owned federal reserve you will lend it from the bankers cartel at 12 percent [by-the-way you-will sell the peoples bank to shareholders [us ; bankers]

And so was the commonwealth [roughly] privatised ,well things rolled along nicely and the banking system ran amuck till the time of bondie and his mates and the banks went bankrupt [some how they were allowed to charge bank fees ,and saved the day , with banking now effectivly taxed [not by percentage of transaction that would be fair [but at a fixed fee that is nothing to the elites and a heavey burden on the poor]

so next feeding day for the bankers was howard and co making super contribution compulsory[a nice extra tax like cost provided yet more money for the banking cartels

ok i havnt mentioned the federal-reserve stolen in the 30's ,because govt became bankrupt ,nor the illegal income tax burden laid on wage earners [that is unconstitutional] nor the fact that constitutionally gold and silver coin will be our only legal tender [and that bank notes that were promise to pay when our pounds /shillings/were still sterling silver

[that became nickle with the introduction of dollars and cents[allowing the private owned fed reserve to keep all our silver and gold ,noting the one time printing of round 50 cent pieces [now containing 13 dollars of silver was actually pressed with real silver ,but not the new generation [by which time we forgot all obout notes being 'a promise to pay IN SILVER']

Any way to those losing your house make sure the 'lender holds your origonal contract [not a replacement copy as is the usual case ] they cant produce the origonal that means they cant take your house[because these have been bundeled into 'securities' ,and onsold ,thus the bank you pay dosnt hold the mortgauge in law. its all a huge con [govt has-been told but continues to play along with the lies.

Arjay,

Your thread has reached in my subconscience. Last night I dreamt that organisations started charging for checking signatures on credit cards.

I wonder if there should be regulation of Banks. That hurts for [usual] believer in the free market. Credit card rates to be capped.

Home equity loans used for depreciating assets capped at 10% of equity and 20% for other loans having some potential for long-term growth: e.g., blue chip shares. Percentages rate stated refer to security vaue, usually 85% of true market value.

In political philosophy in defining a political status, the key question is; In whose intesrest does the Govenment act? In our democracy the People are in theory in control through our votes and lobbyings. Moreover, if re-regularation is required, to curtail the Banks, it is no different than putting a speed limit on a highway: Both are necessary at times

Oliver

Credit cards (and their relatives) are definitely a big issue. Perhaps a more effective approach that may go some way to apeasing that free market mind of yours is not about price regulation.

Instead why not outlaw some of the marketing trickery and increase the onus of credit checking. For example:

1. Outlaw Interest free deals - commonly sponsored by GE and proudly pumped out by hardly normal and his ilk. The reality for most is these offers encourage consumers (i) consumer/consume more/overconsume (ii) forget about the outrageous interest they will be up for if/WHEN they don't clear the debt during the interest free period.

I hate to think about the amount of credit out there in consumer land that is both feeding inflation and currently unaffected by RBA increases because of this unfriendly product.

2. Outlaw Automatic Limit Increases

3. Outlaw direct marketing of consumer credit products such as credit cards.

4. Impose credit checking and capacity to repay obligations on credit providers that void the contract ab initio where a credit provider extends credit without contacting credit providors listed on the consumers credit record.

Four simple steps to protect vulnerable consumers and cut back on consumption ergo reduce pressure on inflation.

Just a thought.

mortgageinsider

mortgageinsider,

An interesting read. Good. Thanks.

GE is a credit agency not a Bank. There is leglisation about how much [very little] information a credit agency can hold, especially in a linked agency agree as with stores. Yet, they have credit scoring systems, I undrestand, that would collect a substantial amount of personal information. It would be intersting to check this against TPA.

Likewiae, does an unsolicited increase amount to a breach of 63(A). That is limits "should" [?] only be increased, if a person writes to the credit provider and requests it. The correctleglisation only deals directly with the provision of the first card. Can the presumption be extrapolated?

[In the days of FID, when say $100 was added to a $1,000 term deposit,that extra $100 amount was deemed a separate new deposit for FID purposes, though Term Deposit in material dorm was for $1,100.]

Thanks Oliver - Noted on GE. That's why I shifted my terminology to credit providers. Of course, GE is an easy target, but there are plenty of others doing the same thing.

I'm also not trying to hijack Arjays thread away from bank focus, it's just that I have been involved in quite a few rescues - although rescue has an overly optimistic ring to it. The crisis often comes down to credit card / easy consumption credit pressure.

This is because this type of credit is extremely easy to access and the amortisation period relatively short. Most of these facilities require minimum monthly repayments of between 2% and 3% of the balance. It's the cashflow pressure from these facilites that ultimately squashes the unwitting. To put that in perspective, imagine if you had to pay $9,000 a month on a $300,000 mortgage. Now that's mortgage stress.

The first card is not the only problem with 63(A). Extension to include subsequent increases could be side stepped by credit providers still offering the increase, then to accept the offer, the borrower must sign an acceptance document. This is how it operates today for many card issuers and could easily be deployed as a defence by the credit providers against prosecution.

For many consumers, the process is too easy, the temptation to great, the comprehension of the downsteam impact not understood or not thought through. Caveat emptor is not enough in this market segment which is why I believe a solution is to outlaw the offer, rather than defining the terms of acceptance. At least that pulls back the reigns a little on temptation.

Many solutions are needed for this one big problem.

One other thing... putting aside constraints on credit history data, GE and any other credit provider can access the Veda database (nee CRAA).

The information available is more than adequate for a credit provider to discover how much credit the customer really has, who it is with and from there, how well that credit is managed. Applications already include borrower consent to exchange information between credit providers, so there shouldn't be any real barriers.

If there is a legislative constraint (I'm not sure that there is), then it seems reasonable to remove it in order to increase the responsibility of the credit provider. When you look at bargaining power, they're the ones that have the lions share.

Usual Suspect,

You can also take your perception of misrepresentation to the TPA tribunal. Even you loose it will tie-up a Bank director for half-day and the cost you just tens of dollars. If scores of people did this, the Bank Boards would be driven crazy.