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Exploiting consumers needs to be illegal


ANZ credit card

The ANZ Bank faces a huge payout after a class action by its customers secured a partial but significant victory in a multi-million dollar legal battle against its credit card late payment fees.

In a landmark legal decision in the Federal Court last Wednesday, it was determined that the bank had been illegally imposing penalties for late payments on credit cards.

The class action coincided with a campaign by consumer advocacy group Choice to have fees brought into line with the real costs to the banks. The bank might charge a late payment fee of $45 even if the late payment costs the bank as little as $5. 

Choice chief executive Alan Kirkland says charging excessive fees — otherwise known as price gouging — is 'a draconian measure that disproportionally impacts some of the most vulnerable consumers in our community'. He told the Financial Review: 'Fees should be an accurate reflection of the costs faced by businesses when customers are unable to make payments on time. It's not the role of a business to punish customers.'

A 45-year-old labourer who participated in the class action told AAP that a late payment of wages from an employer or a computer glitch that was the bank's fault would delay payment of his credit card bill for a couple of days. 'When you are struggling to get by each week with wages to pay your bills, another $40 to $50 out of payments puts you behind the next month.'

The class action sends a clear signal to banks — and other service providers such as Telstra and Optus — that they cannot exploit their relationship with customers without legal foundation. 

Such exploitation — whether it is illegal, or simply unethical — is closely related to the practice of usury, which refers to lending money at an exorbitant rate of interest. Usurers have been taking advantage of vulnerable people since ancient times. 

The most notorious contemporary example has been 'pay day loans', which can charge interest of 1000 per cent or more. They were partially banned in March last year but remain a problem. Many single parent families or people who have lost their jobs feel they have no choice but to go to these predatory lenders because they cannot pay rent or utilities and sometimes they cannot even afford sufficient food. 

Last month, Pope Francis described usury as a 'dramatic social evil'. 'When a family has nothing to eat, because it has to make payments to usurers, this is not Christian, it is not human! This dramatic scourge in our society harms the inviolable dignity of the human person.'

Australia is fortunate to have regulation in place to protect consumers from predatory business practices. But it's not all good news. The Federal Government came to office promising to lessen the burden of regulation to make it easier for businesses to function. That may help the economy, but it also assists unscrupulous corporations and individuals to exploit consumers.

An example is its likely imminent winding back of the hard won Future of Financial Advice reforms that were about to take effect. This will legalise deceptive conduct by financial planners and banks that provide clients with non-objective financial advice giving the best financial return to them rather than the client (e.g. commissions).

We've seen with the case against ANZ that laws can protect ordinary people against exploitation by unscrupulous corporations and individuals. We need to have them strengthened rather than weakened.

Michael MullinsMichael Mullins is editor of Eureka Street. 

Topic tags: Michael Mullins, ANZ, usury, Pope Francis, payday loans, Arthur Sinodinos, Joe Hockey



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Existing comments

Myself + credit card + shoe shop = disaster. This may sound frivolous but this is the cause of much credit card debt in this country. The banks make obscene profits from battlers and middle Australia. It's good that the class action succeeded - banks are an essential service and need to be ethical.

Pam | 08 February 2014  

Michael, like many commentators, you have blurred the distinction between behaviours which are illegal and those which are unlawful. From my reading of the Federal Court's orders, what the ANZ Bank did was unlawful, that is, the fees charged were not a genuine pre-estimate of the Banks loss but in the nature of a penalty, which offended equitable principles and were struck down. Two things follow from that which are of concern. First, this is old law which the ANZ Bank should well have known and probably did. Secondly, without class actions and litigation funding, David would not have slewn Goliath. However, this is not an unususal circumstance. Just look at what we are doing to asylum seekers who are not as fortunate as Mr Paciocco.

Kim Chen | 08 February 2014  

The potential weakening of the financial consumer legislation you detail is bad news indeed, Michael. You would think that the current federal government, given the oft repeated religious convictions of so many of its leading figures, might have had a different approach to protecting individuals and families against these sorts of practices as the consequences could be quite disastrous for some.

Edward F | 08 February 2014  

It's not only laws that we need, Michael, it's also government-owned institutions or community owned co-operatives. People tend to forget, or have never known, that the Commonwealth Bank (common-wealth), the various state banks (sometimes called rural banks or savings banks), and the sundry building societies and credit unions were created so that there was at least some honest brokers in the field. And they worked! But then we decided that choice and the market would keep banks honest. Fat chance. The high interest rates and penalties for late payment charged by private banks, not to mention the charges that they levy from suppliers, are plain usury. We need a government-provided Australian Commonwealth Credit Card, provided on a not-for-profit basis to keep the corporate bastards honest. Don't hold your breath for either this government or the alternative, but if the Church stepped in to facilitate such a service, i'd be one of the first to take it up. Isn't that the sort of action that Benedict is suggesting?

Ginger Meggs | 08 February 2014  

I like the comments from Kim Chen and G Megs. Gouging is worse than usury as it is not based on a fee for service. I think it is about time we called the banks for what they are, "criminals against humanity." To call deregulation aiding business is such a patent euphemism for allowing exploitation, that I am not surprised the Conservatives are so fond of it.

Michael D. Breen | 16 February 2014  

THe solution to these problems lies not in the market or socialism but the Third Way advocated by G.K. CHesterton, BOb Santamaria, ALfrted DEakin , the DLP , (and implemented in part by all AUstarlian GOvernments from the 1900's to the 1970 's when all went wrong.

USurers such as Pay Day lenders need to be regulated and Banks need to be re-regulated. Many of the Bank preoblems would not have occurred under Menzies. Bank Profits are just as usurious as mining super profits taxation will cure this .

Andrew Jackson

Andrew Jackson | 05 January 2015  

Repealing the FOFA laws would not have made one jot of difference to the ANZ class action. The law on which that case decided was developed in the 18th century, before the founding of NSW, to relieve wealthy heirs who gave away their inheritances before their fathers died. It had nothing to do with Parliament. Furthermore, usury is the practice of charging any interest on moneys lent: Exodus 22 and Leviticus 25 forbid it. Any repeal of FOFA may be detrimental, but it certainly won't "legalise deceptive conduct". That has been forbidden in Australia since at least 1975 and is actionable under section 18 of the Australian Consumer Law.

If exploiting consumers should be illegal, we need to understand what "exploiting" means.

Robert Turnbull | 09 January 2015  

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