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Tuesday, 2 February 2016
Page: 110

Dr CHALMERS (Rankin) (19:01): There was so much of what our Tasmanian friend was talking about then that I agreed with—and then he just spoiled it near the end. I would love to be in the room when he wanders back through the door of the office and somebody says, 'Look, that went okay, except you might just want to be aware that, when you talk about the deficit, the deficit is much, much bigger now than when the government changed hands.' I think the rest of it was great, and I hope that, if any of your staff are listening, they might mention that to you as you walk back through the door: the deficit is much bigger now than it was when the government changed hands.

The Competition and Consumer Amendment (Payment Surcharges) Bill 2015 is, of course, a bill all about credit cards and the regulation of credit and debit cards in our economy. Our priority in this area of public policy is always to make sure that the financial system works for more people and not against them. At this time of year, I think, particularly at the beginning of February, as people start to get the credit card bills from a difficult time—a time where their family budget is often quite squeezed over the summer—credit cards really are front of mind in people's thinking as they try and make the family budget add up.

This bill implements one of the major consumer-focused recommendations of the Financial System Inquiry led quite ably and capably by David Murray. What the bill means is that merchants will be banned from excessive surcharging on card transactions, and the ACCC will be given powers to enforce these bans.

Labor has been calling for action on disproportionately high credit-card fees for some time, and we are glad to see that there has been some movement from those opposite in this crucial area. The key reason we support the measures that are before us today is that they seek to lower the cost of credit and debit card transactions for Australian consumers—a very worthy objective in a very important part of the financial system.

Credit cards and debit cards play an important and growing role in our economy more broadly, so we need to make sure that we get the arrangements as right as we can. The advent of the credit card—I think it was in about 1946—was one of the most transformative financial innovations of the 20th century. When you think about the evolution of the credit card over 70 years, we have got to the point where last year Australians made something like 6.36 billion card transactions, worth around $529 billion, according to the RBA. And the volume of card transactions has increased by 163 per cent over the last decade alone. So it is a very important thing to concern ourselves with in this parliament.

As some additional context: it was in 2003 that the RBA permitted retailer surcharges for customers to address the high merchant service fees that payment providers had started charging businesses. The idea of retailer surcharges was to allow merchants to send a price signal to customers about the cost of the payment mechanism they use. The retailer surcharging has had the desired effect of driving down merchant service fees, by around half a per cent of sales.

But—and this is the issue—widespread consumer surcharging has now also opened up a window for merchants, particularly those with market power, to overcharge customers and consumers. The result has been some quite high-profile cases of very high surcharging—for instance, in the travel industry, in some ticket booking websites and in small retail markets in regional areas.

A Galaxy Research survey commissioned by MasterCard found that Australians are paying $1.6 billion annually in credit card surcharges, or something like $130 per person per year. Understandably, many Australians are unhappy about that state of affairs. When you consider that the Financial System Inquiry received 6,500 submissions and 5,000 of those 6,500 submissions were about the topic of card surcharging, you do get a sense of the depth of feeling in the community when it comes to this issue. A 2014 CHOICE survey found that 68 per cent of people believed that retailers should not be able to charge customers extra when they pay with a credit card. So you can see the need for some action to restore confidence among the public in the financial services system and to make sure that consumers are getting the best deal on their credit and debit cards.

Regulating payment systems is especially difficult. The credit card market is different from most markets, in that there are at least three parties with different sets of customers—the card issuer, the banks, the merchant and the cardholder. So there are three or four different sets of customers. Unlike typical markets, there is often insufficient competitive pressure to keep fees in check.

That is why, if you are reluctant to intervene in important markets, there is a very key reason to do so in this case. There is a role for government and for central banks to regulate the market because there is insufficient competitive pressure to keep the fees in check. That is why surcharge caps were one of the recommendations to come out of David Murray's Financial System Inquiry.

This bill introduces a mechanism to limit the surcharge fees charged to consumers by merchants. The limits will apply to all cards currently designated by the RBA Payments System Board, as well as other cards included by accompanying regulations. The RBA will make standards on what acceptable merchant surcharges are for the cards they designate, and regulations will cap surcharges for other cards.

A new part to the Competition and Consumer Act which will allow the ACCC to be the primary enforcement agency for the surcharge cap. Substantial fines, currently $108,000 for listed corporations, $10,800 for other bodies corporate and $2,160 for individuals, will be levied if these surcharge limits are breached. These fines are a strong incentive for businesses to surcharge appropriately, and the ACCC enforcement facility gives consumers a way to report instances of excessive surcharges.

Labor supports the general principles of this mechanism to curb excessive surcharging, which should see consumers get a better deal on credit cards. We do, however, have some concerns about the fine detail of the legislation. We will be supporting the bill, but we want to take the opportunity to flag some issues. First of all, the bill outsources the specific definition of 'excessive surcharging' to the RBA and to regulations to be drafted by the minister. We will be watching closely to ensure that these standards and instruments fully meet the community expectations of reasonable surcharging.

Labor's concerns about the implementation of these caps have not been helped by a genuine lack of clarity from the Treasurer when, on the Today show, he attempted to explain how these changes would work. The member for McMahon ran through in some detail the awful mess the Treasurer found himself in, being unable to explain some of the basic details of what this bill is trying to achieve. We do hope that that has been sorted out on that side, that there is more clarity and more understanding from the chief economic policymaker in this country to understand the intention of and the implementation of this bill. He did tie himself up in knots in that interview with Karl Stefanovic. I will not burden the House with another transcript reading, like the member for McMahon did, but it was really quite a poor performance. Clearly, if the Treasurer does not know how his own policy should be implemented, Labor and the general public have a right to be concerned, and a reason to carefully monitor the implementation of it.

We believe that the standards should be drafted to ensure that surcharges by any name are covered and that businesses do not get away with charging 'booking fees' or 'transaction fees' to skirt the rule. We would also like to see the net as broad as possible so that all cards and payment systems are covered.

The second consideration beyond those broad considerations I have just dealt with is the level of enforcement of these measures. We would like to see the ACCC actively enforcing the bans so that consumers feel the full benefit of this legislation. That means ensuring that the ACCC is resourced adequately to perform this new function, especially after its funding was frozen by those opposite in the horror 2014-15 budget. If we want the ACCC to do its job, we need to ensure that it is adequately resourced. As it stands, it has had its funding frozen under the Hockey/Morrison approach to these things. While the legislation has a noble objective, Labor will continue to monitor the actual rollout of the surcharge limits, to ensure they do as they are intended.

Beyond that, there was a whole range of credit card related recommendations out of the financial systems inquiry, and also out of the committee process in the other place. There has been some good work going on at the RBA in their review of card payments regulation. They released a consultation paper in December on their plan to reform interchange fees and several other aspects of card payments regulation. There are some core recommendations, which I will not go through now, given that time is getting away. I encourage honourable members to follow the very good work of the RBA in this space. Particularly relevant to this piece of legislation is the RBA's recommendation to oblige the provision to merchants of information on average acceptance costs for payment systems. Why is this important? Because the recommendation would make it much easier for merchants to set surcharges at a reasonable level, as defined under this legislation.

We are quite supportive of the RBA's plans, but we on this side of the House are also engaging in our own process of consultation with relevant stakeholders to understand all of the RBA recommendations from all of the various perspectives, because our priority in all of this is to get a better deal for middle Australia when it comes to credit cards for consumers. In that context, we say that we welcome the RBA's contribution, subject to the ongoing consultation that we will perform for our own purposes and our own policy development.

In that space, it has been very valuable to have the Senate colleagues perform, at the committee level, what was a very detailed, very forensic, very valuable process of examination of all of the different aspects of credit cards in this country. This bill deals with a very specific part of the RBA work as a second plank on the work on credit cards, but our Senate colleagues have given us a lot to think about, when it comes to the work of the Senate Economics References Committee. I do want to acknowledge the work of the committee chair—first, Senator Dastyari, and now Senator Ketter, and all of the work they have done.

Evidence given to the committee showed unequivocally that families and small businesses can be dudded by high credit card fees. In that context I thought there were some constructive ideas worth exploring, and that we on this side are exploring, including those ones about a minimum monthly repayment; issues around proper assessment of the ability of customers to pay off outstanding debt over a reasonable period of time, rather than just the minimum balance; the requirement or the possible requirement for card providers to have 'click and close' facilities, so that it is just as easy to shut down a credit card as it is to pick one up and start using it; and the requirement that credit card promotional material clearly discloses the cost of a credit card, including the headline interest rate and ongoing annual fee. Also, we think it would be valuable to explore the idea of a government review of technological innovations that could help facilitate switching in the credit card market, so that if people spot a better deal it is as easy as possible to switch to that better deal rather than feel they are caught or trapped under inferior arrangements. We want to make that as competitive as possible, and that means giving people the right information and also giving them the means to change their provider, if that is in their own interests. As I said, Labor—the opposition—are currently considering the Senate committee's recommendations. We are consulting with relevant stakeholders. We will determine a policy position in the coming months.

Overall, in summary, there is a lot of work to do to improve consumer outcomes and consumer confidence in the area of credit cards and debit cards. Given how important they are to our economy, it is crucial that we get it right. This legislation is part of that effort. I welcome the government putting this bill on the table. As the member for McMahon said, it is better late than never. We want to see the surcharge capped when it comes to merchants and consumers. Our No. 1 priority is to ensure that consumers get the best possible deal on credit cards. We will be working hard from our point of view to design policies to achieve that. We are supporting this legislation. We will hold the government to account to ensure that this bill, as it is implemented, lives up to their promises in this area.