Page 1614 - Week 06 - Wednesday, 19 May 1993
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price control, the level of consumer protection, and the type of sanction available to be applied to credit providers who breach the law. In a national marketplace driven by ever changing technology, these inconsistencies are not only confusing but also costly to both consumers and credit providers. In short, these inconsistencies are unacceptable and are a hindrance to national micro-economic reform.
The decision to introduce fees on credit cards has drawn a lot of media attention. The Federal Government had indicated its intention to take over the regulation of all continuing credit contracts, including credit cards, and last week circulated for comment the draft Continuing Credit Contracts Bill 1993. That Bill would have significantly reduced protection for consumers and as well would create administrative problems by splitting credit administration between the Commonwealth and the States and the Territories. The proposed uniform credit legislation will allow credit providers to impose fees and charges on credit cards if they wish to do so, provided all such fees and charges are fully disclosed. This measure should increase competition between providers of credit card facilities by allowing them a choice between offering credit cards at lower rates coupled with a fee or offering cards at higher rates with no fee.
The Federal Treasurer has asked the Prices Surveillance Authority to monitor credit card interest rates over the next three years to ensure that the promises he has received from the banks about lower interest rates are fulfilled. I also note that the general principle of the uniform legislation in relation to all credit products is to allow credit providers to charge fees, provided they are fully disclosed, with a reserve power to proscribe any fees the States and Territories consider are anti-competitive and unfair to consumers. SCOCAM Ministers may act to use this power if credit card interest rates do not fall to an acceptable level.
Madam Speaker, the requirement that all fees be disclosed is one aspect of the basic principle underlying the uniform credit legislation to protect consumers by applying the principle of truth in lending to all credit provided for consumer purposes, including housing, and to all credit providers, including banks, credit unions, building societies and finance companies. Although the prudential standing of banks, credit unions and building societies is supervised by other legislation, this will be the first time that fair trading and consumer protection laws have been applied to their operations throughout Australia.
Credit providers will be required to make a full disclosure to consumers and guarantors of all terms and conditions of the credit contract so that they can make an informed decision. In particular, to make interest rate disclosure meaningful to consumers, credit providers will be required to disclose what is known as the "nominal rate" to consumers, which reflects the actual rate at which the funds are provided, rather than the "effective rate", which has meaning only if a person has some specialist training. Further, Madam Speaker, to aid consumers in their decision making, consumers will be able to ask credit providers for a comparison rate which, for some types of credit contracts, provides a simple means of comparing the costs involved in different credit contracts. Consumers will be warned by the credit provider of any limitations the rate may have in their particular circumstances. In further recognition of the value accurate comparative information has for consumers, the Commonwealth Government has agreed to fund a consumer information centre to provide comparative information on financial products. I commend the Commonwealth's initiative in this regard.
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