John Deeks: It’s Mind Your Own Retirement with me, John Deeks flying solo today. Coming up next, we are talking money. And as we mentioned with Janelle Ward from YourLifeChoices here on Mind Your Own Retirement, a very good friend of YourLifeChoices is Choice Magazine. It’s been around for a long time and has been helping so many people for so long. Patrick Veyret is on the line now from Choice. He’s the finance guy. He cares deeply about restoring all the power imbalance that big financial corporations have over people. He is a very well learned man and Patrick is on the line right now from Sydney. Welcome Patrick to Mind Your Own Retirement.
Patrick Veyret: Hi, John. Great to be here.
John Deeks: We’re talking about the fact that some banks and institutions, financial institutions, are charging an exorbitant amount of interest on credit card purchases. Explain more sir.
Patrick Veyret: That’s right. In our research, we’ve found all the major banks have high interest credit cards in excess of 20 per cent.
John Deeks: Ouch.
Patrick Veyret: And we think this is simply unfair. Yeah.
John Deeks: They’re not regulated at all by the Commonwealth, or?
Patrick Veyret: No, they remain unregulated. And especially right now when the cash rate is at such a low level – it’s at a historic low level of 0.25 per cent. And our research has found that the banks haven’t lowered the rate on these credit cards and they remain eye wateringly high.
John Deeks: The banks would of course say, well we have to charge interest somewhere, because the cash rate is so low we’re not making money on this and that. So this is a way of making a lot of money for our shareholders.
Patrick Veyret: Exactly. I mean, we think it’s particularly unfair for people with credit cards. The thin relief is currently for people with mortgages and anyone with a mortgage, their rate has dropped down considerably, but there’s no relief at all for credit card holders.
John Deeks: What can the average person do when they suddenly realise they’re getting a hefty old interest rate on their credit cards?
Patrick Veyret: Yeah, look, I would encourage listeners to go and just check their statement to see what the interest rate is. And I would encourage them just to call the bank. I know the bank is a little swamped right now with requests for Covid-19 but just call your bank and say, look, I’m thinking of changing cards/I’m thinking of switching banks. What’s the best rate that you could give me?
John Deeks: Well, of course, the best rates and the best way to do it, of course is, if possible, to pay it to zero each time, isn’t it?
Patrick Veyret: Exactly. Yes. That’s our advice.
John Deeks: Yeah. That brings me to another point. A lot of people, of course, for whatever reason, aren’t able to do that. That’s understandable, but gosh the proliferation of the after pays and the products that are out there for people to buy things and pay it later. What kind of rates are they charging?
Patrick Veyret: Yeah. So After Pay and these ‘buy now pay laters’ actually skirt responsible lending laws because they don’t charge interest rates. What they do is they charge late fees, and according to this law, which is the National Credit Act, you can only be caught by this or captured by this legislation if you charge interest rates. And so what we’ve found is – there are a lot of people who have multiple debts. Multiple providers contacting them, and they accrue a lot of late fees, and these get sold on the debt collectors. But no, there’s no interest rate.
John Deeks: So, they make their money by you not paying on the due date and they charge a fee for your late payment.
Patrick Veyret: Exactly. Year on year that’s been increasing. A lot of the companies have said, no, this is not how we make money but if you look at the financial records of these companies. Every year this increases more and more, it becomes a great percentage of their income.
John Deeks: I remember last year there was a lot of talk on various programs on TV, the current affair type programs, about the payday payments or payday lenders?
Patrick Veyret: Oh payday lending.
John Deeks: You know that’s a real horror. Talk to me through that.
Patrick Veyret: Yeah, this is something that is that the real extreme end of institutions profiting off people, and payday lenders market themselves as a quick tide over loan, but the truth is that the interest rate they charge is over 400 per cent a year.
John Deeks: Ouch.
Patrick Veyret: Yeah. And they target vulnerable people. And we’ve noticed recently, and a lot of the financial counsellors and community legal centres have noticed, that payday lenders have now shifted their marketing towards kind of preying on people during Covid-19.
John Deeks: How are they doing that?
Patrick Veyret: Through their marketing, through the language that they use. Say, you know, “Are you struggling because of Covid? Get a payday loan” but there is a solution. There is a bill that has been sitting in parliament for a number of years. I think it’s now over a thousand days that the federal government is considering, and there’s been a number of payday lending lobbyists that prevented this bill from passing. So what that would do would greatly reduce the interest rate and have a lot more protection for vulnerable people who have to access these products.
John Deeks: We’ve been through a massive look at the banks and other financial institutions. Is there any call for a further inquiry to expand to cover people such as that?
Patrick Veyret: With payday lending? There’s been a number of Senate inquiries into payday lending. And the evidence is there, like the impact on people, just one can only imagine the pressure of having a 400 per cent interest rate loom over your head, especially vulnerable people. Yeah, and I think it’s really incumbent on the government to act, especially during Covid. During this current crisis when people are struggling financially and they’re looking for some money to tide them over.
John Deeks: Patrick as always Choice is at their forefront of looking after a consumer’s interests and we know that. Where can people go to find out more about what they could be doing?
Patrick Veyret: Yeah. I’d encourage you to go to the choice.com.au website and go to the banking and finance section. In particular, we’ve put together one article with a number of tips and resources that people can do, especially around the coronavirus period, but more broadly, there are tips around credit cards, watching out for balance transfers, a number of helpful assistance for you there.
John Deeks: Patrick, thank you so much indeed. We’re going to put up that link on our YourLifeChoices website as always, and as always, we’re indebted to you and the good folks at Choice who’ve been going so long and protecting us for so many years. Everything from washing machines to soap powder to the complexities of the financial institutions. Patrick Veyret, Thank you so much and be well and look forward to talking to you again soon.
Patrick Veyret: Thanks very much. I appreciate it.