Rise Up Australia will ensure that the banking system serves the national interests of the Australian people under the direction of the Parliament and that consumers are protected from unethical practices within the financial services industry.
We are also committed to improving the financial literacy of all Australians (1), encouraging them to adopt sound money management practices so they can ‘live within their means’ and avoid the debt traps that have ensnared so many in cycles of poverty.
1. Protecting Personal Deposits
Rise Up Australia wants to protect citizens’ personal deposits by requiring that investment banking is kept separate from commercial banking as in the Glass-Steagall Act of the United States. It is important that we learn lessons from history.
Also known as the Banking Act of 1933, this legislation was “enacted as an emergency response to the failure of nearly 5000 banks during the Great Depression” (2) and established new safeguards to protect citizens and restore consumer confidence in the banking sector. The 1929 stock market crash resulted in a loss of an estimated $319 billion in today’s currency and caused thousands of banks to close, unemployment to skyrocket, wages to plummet and suicide rates to rise (3)(4).
Separating retail banking from investment banking will prevent the use of personal deposits for risky investments, such as playing the stock market (2). We believe that financial institutions can be competitive in the marketplace while still operating within limits that protect consumers.
2. Targeted Financial Concessions
To support the economic productivity of our nation, Rise Up Australia would require that food production ventures and essential infrastructure projects are financed at concessional interest rates for Australian citizens.
Providing lower interest rates would support our struggling farmers and food manufacturers who face price pressures from supermarket wars, tough weather conditions and an industry flooded with cheap imports.
Concessional rates would also support our goal of majority Australian ownership of infrastructure, allowing investment to be more affordable to our citizens. These concessions would provide long-terms benefits to our nation, including a reduction in the loss of Australian assets to overseas interests and an improvement in local jobs growth and profit-sharing.
3. Lending Criteria Reforms
As of August 2013, Australians owed an estimated $36 billion on their credit cards alone, with many also paying off home loans, car loans and other types of credit (5).
Rise Up Australia would like to reduce our nation’s overreliance on credit that contributes to economic disadvantage, particularly among low-income groups. We would require a greater onus on borrowers to prove their capacity to pay off a debt and require lending institutions to equip their customers in making wise choices.
For example, lenders would be required to provide up front a fact sheet with a range of repayment figures, how many months/years it will take to pay off the loan and total interest paid. This may be the ‘reality check’ consumers need when deciding to proceed with a loan or opt for a higher repayment amount to pay off their debt faster.
We also support a ban on mortgage exit fees to allow greater competitiveness between lenders, without penalties for borrowers to search out a loan that better services their needs. Improving financial literacy and raising awareness of consumer choices is essential for sound fiscal management.
Rise Up Australia would also like to tighten laws governing pay day lenders and others who provide short-term loans who take advantage of the poor to charge high-interest rates that are sometimes upwards of more than 500 percent (6).
While we recognize that low-income borrowers pose higher risks for lenders, some of the practices in this industry are predatory and contribute to vicious cycles of poverty. Research found that “almost 80 per cent of those using pay-day loans were on Centrelink or pension payments; only 20 per cent of borrowers considered themselves better off after taking out pay-day loans and half said they were worse off.”(7)
Although these borrowers might be desperate to pay for an unexpected bill, such as a funeral, restrictions on the amount of money that could be borrowed each financial year in proportion to taxable income, greater flexibility on repayment terms and a reasonable cap on interest rates should be mandatory.
4. Financial Info/Identity Theft
As the Australian banking system closes retail branches at record rates to make way for a rise in internet banking and ATM use, it is imperative that financial institutions increase their investment in technologies and consumer education initiatives that guard against identity theft (8).
Evidence shows that identity and credit card theft are the nation’s fastest growing crimes, affecting more than four million Australians each year and stealing billions of dollars off unsuspecting victims (9). Scams can take many forms, such as card skimmers on ATMs and EFTPOS machines; bogus fraud alerts and ‘phishing’ emails (pretending to be from the bank and requesting passwords/identity info); ‘dumpster diving’ (eg bank statements stolen from rubbish bins to fill in loan applications); and viruses/hackers breaching online banking systems (10).
Businesses seeking e-commerce capabilities for their websites would be required to furnish evidence of adequate virus protection when applying for merchant facilities through the banks to guard against malware that steals financial data, such as credit card numbers and bank log in details (11).
Rise Up Australia would require banks to have sophisticated fraud detection and response systems. They would also have to provide an updated fact sheet to customers each year, in collaboration with law enforcement authorities, outlining a list of scams and practical suggestions on reducing risk.
We believe that government can work effectively with the financial services sector to strike a healthy balance between capitalist endeavour and regulatory safeguards for the benefit of all Australians.
1 Reform must be supported by promotional campaigns to educate and inform. See, ‘Reform fails to get customers to switch banks,’ News, 29 April 2013, http://www.news.com.au/money/banking/reform-fails-to-get-customers-to-switch-banks/story-e6frfmcr-1226631684082
2 ‘Glass-Steagall Act (1933)’, New York Times, retrieved 29 August 2013, http://topics.nytimes.com/top/reference/timestopics/subjects/g/glass_steagall_act_1933/index.html
3 ‘A Brief History of The Crash of 1929’, Time magazine, 29 October 2008, http://content.time.com/time/nation/article/0,8599,1854569,00.html
4 ‘Suicide rates rise and fall with the economy: CDC’, US News, 14 April 2011, http://health.usnews.com/health-news/family-health/brain-and-behavior/articles/2011/04/14/suicide-rates-rise-and-fall-with-the-economy-cdc
5 A real time debt clock and a debt reduction calculator can be found at ‘Clock is ticking on credit card debt’, Money Smart, Australian Securities and Investments Commission (ASIC), http://www.moneysmart.gov.au/borrowing-and-credit/credit-cards/credit-card-debt-clock
6 ‘Post Christmas blues as loan sharks bite workers,’ The Advertiser, 17 January 2012, http://www.news.com.au/money/payday-bite-as-loan-sharks-hit-workers/story-e6frfmci-1226245966457
7 ‘Pay-day loans no solutions to most, survey finds’, The Age, 13 August 2012, http://www.theage.com.au/victoria/payday-loans-no-solution-for-most-survey-finds-20120812-242v1.html#ixzz2dKQHoy7w
8 ‘Australia loses 130 bank and credit union branches in 12 months’, National News, 21 August 2013, http://www.news.com.au/national-news/australia-loses-130-bank-and-credit-union-branches-in-12-months/story-fncynjr2-1226701576883
9 ‘Identity theft alert’, Today Tonight, 14 October 2011, http://au.news.yahoo.com/today-tonight/lifestyle/safety/article/-/10471251/identity-theft-alert/
10 ‘Identity Theft’, Australian Competition and Consumer Commission, 29 August 2013, http://www.scamwatch.gov.au/content/index.phtml/tag/identitytheft
11 ‘Financial Malware’, Technopedia, retrieved 29 August 2013, http://www.techopedia.com/definition/56/financial-malware