Additional Comments by Coalition Senators
1.1
Coalition Senators wish to thank all those who participated to this
inquiry and in particular the Committee Secretariat for producing such a
thorough report on an important issue. While the majority report includes a
number of sound recommendations, we would like to make additional comments to
complement these outcomes.
1.2
The Government has already commenced addressing some of the
11 recommendations by implementing actions as a result of the Financial
System Inquiry, including addressing interchange fees and customer
surcharging. The Government has moved to legislate a ban on surcharges that
exceed the 'reasonable costs' faced by merchants in accepting cards.
1.3
The Government announced in its 2015–16 Budget earlier this year a pilot
financial inclusion action plan for vulnerable individuals as part of
Australia's G20 commitments.
1.4
However, in considering the most appropriate responses to the problems
of ensuring an appropriate regulatory regime for credit cards a number of
considerations are important.
1.5
First, the evidence presented to the inquiry shows that the vast
majority of Australians use their credit cards responsibly and the proportion
of individuals using their credit cards for long term debt is small. Evidence
provided during the hearings indicated that low income earners generally
managed their credit cards well.
1.6
Given this, the most effective regulatory response will address the
problems of misuse of credit cards while not imposing wider costs across the
economy and society.
1.7
As part of its red tape reduction agenda the Government has committed to
an ongoing process of reducing the cost of unnecessary or inefficient
regulation imposed on individuals, business and community organisations. In
addressing the very real problems identified for some credit card users we need
to ensure that the regulatory approaches adopted are 'fit for purpose' and
targeted.
1.8
Credit cards are not in essence an amortising financial tool. They are a
revolving line of credit that helps households manage cash flows. As such they
are both important and complementary to other financial products available to
consumers.
1.9
Consideration must be given to ensuring credit limits are tailored to
each client's circumstances. The Committee heard that the model used in the
United Kingdom assesses credit card applicants against more stringent
requirements and includes a minimum repayment formula that sees repayments
calculated on the basis of interest, fees and 1% of the principle. Coalition senators
feel this deserves further research as an option in Australia.
1.10
Second, elements of recommendation 3, while having merit in their intent
at least, appear to be unduly prescriptive and likely to stifle beneficial
innovation and growth by firms seeking to meet market needs for more
information.
1.11
Third, recommendation 4, which relates to mechanisms to facilitate
switching in the credit card market and account number portability, which have
been previously examined in Australia and elsewhere at times with adverse
findings, does however bear further investigation in our view. Account number
portability offers, at least in theory, significant consumer benefits through
the encouragement of competition, as evidenced by similar measures implemented
in the mobile telephone market. On that basis we feel the concept is deserving
of further inquiry.
Senator
Sean Edwards Senator
Matthew Canavan
Economics
Committee Deputy Chair Committee Member
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