Trea­sury doc­u­ments ex­pose in­creas­ing greed on credit cards Banks outed on goug­ing

Townsville Bulletin - - NEWS - JOHN ROLFE

THE full ex­tent of the rort banks are now per­pe­trat­ing through plas­tic can fi­nally be re­vealed, with se­cret fed­eral Trea­sury mod­el­ling show­ing the prof­itabil­ity of credit cards has spiked by nearly a third since the GFC.

The mod­el­ling is con­tained in brief­ing doc­u­ments pre­pared for Joe Hockey in March and April af­ter the Trea­surer asked his depart­ment why credit- card rates had not fallen in re­sponse to the Re­serve Bank of Aus­tralia’s four- year cam­paign of of­fi­cial cuts.

As a Se­nate in­quiry into credit- card in­ter­est rates looms – and with many house­holds strug­gling to re­pay their share of the $ 51 bil­lion owed on plas­tic – News Corp Aus­tralia to­day brings to light the brief­ing doc­u­ments, ob­tained un­der Free­dom of In­for­ma­tion laws. They re­veal: In­ter­est- rate “spreads earned by card is­suers” have widened by close to a third since the Global Fi­nan­cial Cri­sis, from 6.7 per cent to 8.7 per cent;

In a three- way com­par­i­son with New Zealand and the UK, only in Aus­tralia are spreads ex­pand­ing;

The “re­turn on eq­uity” reaped from plas­tic is twothirds greater than on mort­gages;

Credit- card in­debt­ed­ness has deep­ened for rich and poor – as well as most of those in be­tween – with mid­dle- in­come house­holds least likely to avoid in­ter­est charges; and

Un­til four years ago, cred­it­card in­ter­est rates moved in line with the RBA’s of­fi­cial rate, de­spite banks claim­ing there is no re­la­tion­ship. The chair­man of a Se­nate com­mit­tee about to hold an in­quiry into credit- card in­ter­est rates, La­bor’s Sam Dast­yari, said the doc­u­ments showed cus­tomers weren’t get­ting a fair deal. “Peo­ple are an­gry and this new in­for­ma­tion jus­ti­fies that anger,” Sen­a­tor Dast­yari said. “My ad­vice to cus­tomers is this: start telling credit card providers enough is enough. Ring them up, email them, visit them and tell them things need to change.”

Con­sumer group Choice’s head of cam­paigns Matt Levey seized on the ev­i­dence of the close his­toric link be­tween credit- card and RBA changes, say­ing: “It punc­tures the banks’ PR cam­paign. They’ve made us feel silly for think­ing there ought to be a re­la­tion­ship. There is. Credit cards are not mag­i­cally dif­fer­ent.”

Banks had turned to rort­ing credit cards to make up for lower prof­its on mort­gages, Mr Levey said.

Con­sumer Ac­tion Law Cen­tre CEO Ger­ard Brody was dis­turbed by the find­ing of deep­en­ing in­debt­ed­ness. He said re­spon­si­ble lend­ing laws had to be re­formed.

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