Sharkwatch June 2001

From where we sit…..

It was heartwarming to receive financial counsellors’ response to Wayne Warburton’s recent article in the last edition of Sharkwatch on ’The forgotten duty of care: Looking after oneself’. It seemed to strike a deep chord, with many counsellors expressing their thanks to Wayne at a recent FCAN meeting in Sydney.�

One counsellor remarked that some of the signs described in the article had alerted them immediately to their own problems which had made them step back and rethink their coping strategies.

Talking to counsellors all around Australia, the common issue that comes across is the unrelenting demand placed on financial counselling services and the toll that this can take on counsellors themselves.�

So please, stop once in a while and think carefully about yourselves and how much you are taking on. Take a break, do something just for yourself and get the balance right.

Wayne is busy writing another interesting article along similar lines of counsellor care—so look out for future editions ……. Ed

Accessing Superannuation ON AN AGE BASIS

by Heather Webster

When can you access your superannuation on the basis of age**?

A member may access their benefits upon retirement, subject to the governing rules of the fund. Retirement depends on a persons age and employment intentions. A retired person cannot access their preserved benefits before they reach preservation age. This is dependent upon their birth date.

Date of birth

Preservation age

Before 1/7/1960

55 years

1/7/60 – 30 /6/61

56 years

1/7/61 – 30/6/62

57 years

1/7/62 – 30/6/63

58 years

1/7/63 – 30/6/64

59 years

After 30/6/64

60 years

When a member has reached their preservation age but is less than 60 their retirement occurs when:

An arrangement under which the member was gainfully employed has come to an end. This may have occurred at any time including prior to their preservation age; and
The trustee must be reasonably satisfied that the member never intends to work in excess of 10 hours per week again.

When a member has reached age 60, their retirement occurs when their gainful employment ceases after they have reached 60. In this case the trustee does not need to form an opinion on the members intentions to seek future gainful employment.

When a member, aged 60 or more, is in two or more employment arrangements at the same time, the cessation of one of the employment arrangements is the condition for release in respect of benefits other than those that relate to the continuing employment.

All this information and much more is available through APRA’s website.
www.apra.gov.au�

Click on Insurance & Superannuation (shown in blue on the left hand side of page)
Click on Legislation. Circulars & complaints
Click on circulars
Click on superannuation
Click on IC2

**Please refer to your back copy of Sharkwatch October 2000 for a detailed account of the rules governing access to Superannuation through Hardship, Incapacity etc.

Heather Webster is a financial counsellor with Credit Helpline in Sydney.

QUEENSLAND

Kate Keating and Lola Mashado from Financial Counselling Services (Qld) are off on a fact finding tour this month to Canada and parts of the USA. They have organised to visit and meet up with financial counsellors (called Credit Counsellors) and associated services throughout their tour and hope to bring back useful information and ideas.

Margaret Clements from Rockhampton and Saskia ten Dam from Townsville are also on the move soon. They will be running a two day education program next month in Mackay to train the Lifeline telephone counsellors there in the basics of financial counselling. This will give some badly needed support for Saskia and Margaret as the only two financial counsellors in an area covering the whole of central Queensland.

NEW SOUTH WALES

Wagga Wagga Financial counselling service has a new counsellor—Tony Gale. Tony brings a wealth of knowledge to financial counselling after working in the world of finance for over twenty years. He has been doing a training course with Kevin Howard in Bathurst for the last six months, working towards his accreditation.

Ryde Eastwood Financial Counselling Service will be losing one of their foundation members next month. Margaret Kilby is retiring. She has been involved since the service first started in 1986 and shares the position of co-ordinator with Narelle Brown. Margaret has worked tirelessly during her fifteen years and has made an enormous contribution not only to Ryde Eastwood but to financial counselling generally in NSW. She was on the executive of FCAN for a long spell as Vice-President, Membership Secretary and Secretary.

SOUTH AUSTRALIA

Changes to funding have meant that the Roma Mitchell Community Legal Centre in North East Adelaide is closing on June 30th. This has had an impact on the financial counselling service there headed by Susan Lilley and her group of volunteers. However, just before going to press, Susan heard that the service will continue to operate from the Northern Metropolitan Community Health Service in Norwood which has been a co-location for the financial counselling service covering the Tea Tree Gully and Ingle Farm sites since 1992.

Kevin Woon in Coober Pedy is also planning an education program for years 9 through to 12 at the local school. This last month has seen him busy working on a comprehensive information booklet which has been designed to explain the basics of good money management in an interesting and fun way to young people who are about to step into the world of credit and mobile phones.

VICTORIA

The Financial and Consumer Rights Council of Victoria are undergoing some changes this month with their Executive Director of five and a half years, Barbara Romeril moving into a new role with the Community Child Care Association of Victoria. Sharon Barker who has herself been closely involved with FCRC for over four years, will take over.�

The FCRC are also moving offices this month to the Wales Building, cnr Swanston & Collins St, Melbourne. Their phone number remains the same.�

The annual conference of the FCRC takes place just outside Melbourne in the beautiful Yarra Valley this year at a conference centre of the same name. It will be held from Sunday 22nd July through to Wednesday 25th July with Keynote speaker Rod Quantock, well known comedian and advocate for social justice. The theme for this year’s conference is “Staying Connected” Chris Field from the Consumer Law Centre Victoria will be speaking on Pay Day Lending and workshops on current consumer issues and concerns will be held over the four days.

NORTHERN TERRITORY

The five financial counsellors headed by Cheryl Cryer, who make up the Northern Territory team, Peter Carratt (Darwin), Dianna Bessell (Katherine), Kevin Rolfe and Judy Blundell (both from Alice Springs) held their first Annual Conference this year in Darwin at the Anglicare Centre on the 25th and 26th of June. Cheryl Cryer organised an interesting and diverse two days with Keynote Speaker George Georgio, Official Receiver from ITSA , Adelaide, and other speakers from the ACCC, the Banking Industry, Telstra and the NT Ombudsman.

Kevin Rolfe, who works for the Tangetyere Council in Alice Springs has made enormous inroads over the years in his dealings with aboriginal issues in relation to social security issues particularly. He has been a fierce advocate in dealing with injustice on their behalf and his reputation for dealing swiftly and promptly with errors in social security and other government departments is well known.�

One such case recently was a young Aboriginal whose wages had been garnisheed for the last eighteen months as Abstudy declared he owed them $5,000 and had not completed the course. (The client proudly showed Kevin a photo of his graduation with him being congratulated by the Course Co-ordinator). With just one phone call Kevin had the decision reversed and also obtained a full recovery of the money for his client and a formal letter of apology.

WESTERN AUSTRALIA

The Financial Counselling Association of Western Australia will be holding their annual conference from the 3rd to the 7th of September this year, in Fremantle. The theme of the conference is “Future Directions: Financial Counselling in the new millennium” Speakers so far include: Val Riley who will talk about working with aboriginal clients and aboriginal culture, Angela James from Fines Enforcement and a speaker from the Child Support Agency to give an update.

Anita Seery and Cheryl Condon share the work at the Murchison Financial Advocacy Services in Meekatharra and encounter a variety of clients in this remote area. Recently Anita had a client who, because of a debt with the Water Board, had had their service cut to a trickle. The client had a young boy with a disability and was bathing him in a garbage bin. With Anita’s hard work she successfully managed to get the decision overturned and was delighted when the client phoned to say the water was back on and the family could once again use the shower.�

TASMANIA

Judy Cornwell and her small but hardworking team of financial counsellors all recently attended a workshop on working with same sex and transgender clients and colleagues. The workshop was conducted by The Working it Out group from Hobart.

NEWS FROM AFCCRA (Australian Financial Counselling and Credit Reform Association)

Jan Pentland reports: In terms of news about AFCCRA, the latest edition of the 'AFCCRA News' is currently being distributed through the AFCCRA state representatives so please look out for it.

Is Bankruptcy a Debt Recovery Tool?

by Greg Mowle

At the recent Australian Monopoly championship the eventual winner outlined his winning philosophy: “Be ruthless and bankrupt all the other players”.

At the 2000 National Bankruptcy Congress insolvency practitioners and credit managers expressed the same sentiments. To the financial counsellors at the Congress it appeared these players do not realise they are not playing a board game but are operating in a real society and as such their actions have devastating effects on the community as a whole.

With bankruptcy numbers skyrocketing over the past ten years it is ironic that the great majority of those filing for voluntary bankruptcy have high levels of unsecured debt, are on a low income and have no non-exempt property. In other words it is those debtors who have the least to fear and literally nothing to lose that are being hounded into bankruptcy by creditors who have nothing to gain. The great losers are the Australian public who pay for the high rate of bankruptcies and Bad Debt write-offs in the form of higher interest rates, higher insurance premiums and higher taxes and levies.

The purpose of this article is to rebut the arguments propounded by insolvency practitioners and credit managers (referred to from here on as “debt collectors”) as to why bankruptcy is a legitimate debt collection tool.

So why do debt collectors continue to threaten debtors with bankruptcy?

Spite
Many debt collectors cannot stand the thought that someone is not paying their bills.�

This implies that all debtors are bad all the time. Life has its vicissitudes. All of us will go through some type of temporary change of circumstances at some point. The #1 trigger for bankruptcy is unemployment, a condition that will touch almost all Australians at some stage in their lives due to the dramatic changes in work and employment over the past 20 years. The days of joining an employer “for life” are long gone. Lenders who lend to people on an unsecured basis must realise that the borrower will be unemployed for period or go through a period of little or no earnings.

Ignorance
Many debt collectors, especially those in the frontline of collecting consumer debts, simply do not know what bankruptcy entails. Most have outdated or mythological beliefs about what will happen to a debtor if they go bankrupt. Many believe the debtor will go to jail or will have to hand over a minimum of half their income (including government benefits), and will suffer the ignominy of a van pulling up outside their house and men taking all their meagre possessions. I was into my 10th year of credit management and was astounded to learn that a single person was able to earn up to $30,000 a year before having to make contributions.�

Shareholder Pressure
With the squeeze on to return increasing profits and hence dividends to shareholders bad debts need to be written off quickly. As the volume of credit being written increases, credit managers are taking the gamble that bad debts will not increase at the same rate as sales. The quickest (and cheapest) way to prove that a debt is “bad” is if a debtor advises a bankruptcy file number. The quickest way to force a debtor into bankruptcy is by increasing harassment and refusing all cries for short-term assistance until the debtor chooses bankruptcy to stop contact from creditors.

A Better Return?
The main reason put forward by debt collectors for rejecting settlement offers is that, if it is not above the entity’s tax rate, or insurance return, then it is not viable to accept the offer. The belief is that it is easier to accept a tax deduction equivalent to 36% than a full and final settlement offer of 10% when the return in bankruptcy will be zero. This is not correct. It is true that section 25-35 of the Income Tax Assessment Act allows a deduction for a bad debt, but it is allowable for the portion of the debt that is not recoverable. Any genuine offer by the debtor will boost the creditor’s return, as demonstrated in this simple example using a 36% tax rate:

(1) DEBT $10,000
OFFER $1,000 = 10%

The debt collector rejects the offer believing it delivers a 26% net loss. They write off the whole debt. The return is $3600 ($10,000 * 36%).�

(2) But if the $1000 offer were accepted this is the result on the profit sheet:

SETTLEMENT $1000
TAX DEDUCTION @ 36% * $9000 = $3240
TOTAL $4240

The creditor is $640 better off or has 18% more funds available to pay their debt collector’s fees !!!

Debt Collectors Get Paid Regardless of Return
Imagine the effect on bankruptcy numbers if a debt collector’s remuneration was tied to the expected return from bankrupting the debtor? The answers to the following questions are obvious:

Does the debt collector get paid in accordance with the return from the bankrupt’s estate, so that, if the return is nil the client does not have to pay; or
Does the debt collector’s fees get paid regardless of the return from the bankrupt estate?

When the debt collector is assured of payment regardless of the return there is no contemplation of the detrimental effect on the future of the debtor and the consequences for society of escalating bankruptcy numbers.

Label Them Forever
Should a person be permanently labelled for a temporary change of circumstances?

Our legal system supposedly ensures that persons convicted of a crime pay a penalty, be it a fine or jail term, and are allowed to get on with the rest of their lives. Often, however they will be labelled a “criminal”. To debt collectors, the same punishment must be meted out to debtors. For the “crime” of becoming unemployed and thus being unable to repay their debts at one point, they must wear the tag of “bankrupt” for the rest of their lives. They suffer loss of face and self esteem. Their ability to acquire basic services such as renting a property or having the telephone connected, is affected for the rest of their lives. Their employment prospects are hampered and they may ultimately have to be subsidised by taxpayers through the social security system.�

Auditor Requirements
Debt collectors also put forward the reason that a bankruptcy is needed because “the auditor requires it to be done” in order to gain a tax deduction. This is not correct. Under section 25-35 of the Income Tax Assessment Act 1997 to gain a deduction you merely have to show that the debt is bad. Tax Ruling 92/18 on section 25-35 states that a debt is bad if “on an objective view, there is little or no likelihood of the debt being recovered”. A statement of financial position verified by documentation or a letter by a financial counsellor is sufficient to show that the debt cannot be recovered within the financial year. A record of the collection activity taken by the creditor will back this up.

Seek Funds Elsewhere�
The threat of bankruptcy is used as a pressure tactic to force the debtor to seek funds elsewhere. A common suggestion is to borrow the money from family and friends. Unfortunately, the debtor is forced to borrow from loan sharks. Although the debt collector is happy his or her ledger is now tidier, this does not solve the problem: it merely shifts the burden from the debt collector to the society at large. A large financier can afford to write off tens of thousands of dollars, but a family member lending their own funds cannot afford to and gains no tax deduction when a private loan is not repaid.

The USA approach - no creditor petitions
Professor Michael Staten of the USA spoke at the Congress and surprised much of the audience when he explained there is no such thing as a creditor's petition in the USA. Bankruptcy is only voluntary. Presumably, creditors realise the sheer futility of spending a lot of time and money bankrupting an individual for little or nil return.

Considering the needs of debtors and of society
The Reverend Tim Costello also spoke at the Congress. He gave the debtors' perspective of bankruptcy and mentioned its social impact. He preached the need to return to community values and focus on society's needs rather than individualistic wants. Lets hope that those individuals focused on chasing their fees for debt recovery procedures were listening.

Greg Mowle is a financial counsellor with Lifeline in Brisbane, and a former Credit Manager with first hand experience in debt collection.

The Law Matters

RETAIL LEASES

By Chris Joyce, Solicitor, Credit Helpline NSW

If your client has a dispute in regard to a financial product or service, FICS can possibly help

We often see clients who have gone into business and have leased a shop from which they conduct their business, and it is not uncommon for disputes to arise between the tenant and the landlord. In NSW the rights of both the tenant and landlord are set out in the Retail Leases Act .�

The Retail Leases Act (NSW) covers such things as the right to compensation for pre-lease misrepresentation, review of market rent, repairs and maintenance, alterations and refurbishments, assignment and termination of lease, shopping centre leases and dispute resolution.�

The Administrative Decisions Tribunal has a special section that deals with retail lease disputes. The rights of the tenant are quite extensive under this Act. In other states and territories there is similar legislation e.g. Retail Shop Lease Amendment Act – (QLD)

Also for all States and Territories there are rights in sections 51AA, 51AB, 51AC and 52 of the Trade Practices Act (Cth) which can be used to protect business tenants in cases where the landlord is a corporation. In particular, Section 51AC—Unconscionable conduct in business transactions—has been used to reinforce the rights of retail tenants.�
The Federal Court has given a wide interpretation as to what is unconscionable conduct. ACCC -v- Leelee and ACCC –v- Simply No-Knead. Section 51AC (3) contains criteria (similar to that of section 70 (2) of the Consumer Credit Code—Unjust transactions) by which the court will assess whether or not unconscionable conduct has occurred.�

The broad provisions of Section 51AA –Unconscionable conduct within the meaning of the unwritten law of the States and Territories—have also been used by retail tenants.�

A tenant will always have an action under section 51AA if they can show that they were the weaker party and were in a position of particular disadvantage, and that the stronger party (the landlord) took unfair advantage of this fact.�

Under Section 51AC unconscionable conduct has been held to include such things as the imposition of undue pressure and unfair tactics, a failure to negotiate, a lack of good faith, and a failure to comply with an applicable industry code.

�

BETS 4 KIDZ

By Richard Brading, Principal Solicitor, WCLS

Australia leads the world in developing gambling problems. As with drug, alcohol and tobacco abuse, the biggest at-risk group is the young. Children are constantly exposed to gambling advertisements telling them to enter competitions and win.�

Although minors (persons under 18 years old) are not permitted to gamble on lotteries, poker machines, or horses, there are plenty of entry routes to the addictive world of gambling. In most jurisdictions minors can legally gamble on trade promotions (e.g. prizes if you cut out the coupon & place in the barrel), raffles (e.g. a charity run lottery with total prizes under $20,000); bingo; football tipping competitions and a range of little-known forms of gambling.�

Of course, the big gambling league of pokies, casino and racing is forbidden fruit and therefore highly attractive to teenagers. Some in the gambling industry are conditioning children to become gamblers. The Crown Casino complex in Melbourne is perhaps the best example. Crown has numerous teenage entertainment venues including cinemas, amusement arcades and eateries. The enormous gambling area is right in the middle, and highly visible to the teenagers who are of course prohibited from entering. Throughout the country, the same situation exists on a smaller scale. Gambling in its vast array of forms and locations is provided in a prominent and attractive manner to youngsters.

Children are permitted in clubs and hotels, although not in gambling or bar areas. Their presence in these venues invites the same sort of exposure to gambling, but on a smaller scale. One Sydney club thoughtfully provided an amusement arcade for young people to play while their parents gambled. Half the machines enabled the youngsters to gamble for “tokens”, including a toy poker machine complete with handle. Other venues encourage children to participate in bingo, raffles, lotteries and competitions. Schools, churches and charities can be guilty of promoting children’s gambling as well as business entities.
The conditioning of minors to gamble is highly disturbing. It is also embarrassing to the more responsible sections of the industry. The CEO of Clubs NSW recently wrote to his members:

“As a club member and parent and presumably a future grandparent what I’m searching for is things like:

Inexpensive children’s menus in dining areas and suitable furniture (e.g. high chairs)
In the larger clubs, high quality child minding facilities and qualified staff
Appropriate separation where possible between family areas and gaming areas/sports bars
Occasional organised events and activities for children (e.g. The Wiggles, magicians)
A sense that children are actually welcome
Junior sub-clubs for sports and other activities like fishing”�

These things do exist in some venues, but sadly the emphasis is on gambling, gambling and more gambling.

Gambling advertising expenditure is generally not permitted in the general TV viewing time slots, but permitted at other times, particularly when teenagers are watching. Gambling advertising is one-sided, urging mugs to gamble and win, without presenting a balanced view of the risks. Whilst responsible gambling advertising has had some success in Victoria, it is virtually non-existent in other jurisdictions. The truth is that gambling advertising gets more people hooked on gambling, and perhaps should be banned. Meanwhile, the conditioning of our youth to gamble is a serious problem that is yet to be addressed.

Facts about mental illness

Mental illness is a fact of life for many Australians and can be a causal or a complicating factor in many of the cases that come across a financial counsellor’s desk. Here is a list of facts about mental illness that may be of interest.

Five of the ten leading causes of disability worldwide are mental problems – major depression, schizophrenia, bipolar disorder, alcohol use, and obsessive-compulsive disorder (OCD).

A 1997 Australian Bureau of Statistics survey showed that 18% of respondents in a sample of 10,000 reported having experienced symptoms of a mental disorder in the last 12 months.

It is estimated that about 1 million Australians currently suffer from a mental illness or disorder.

20% of the population suffer from a mental illness in their lifetime, some short-term other chronic long-term.

It is estimated that of those suffering mental disorders:

34% are affective disorders (e.g. depression or dysthymia [chronic, mild depression])

23% are anxiety disorders (e.g. panic attacks, phobias, OCD, generalised anxiety disorder [GAD], agorophobia).

13% are substance-use disorders (e.g. alcohol, narcotics)

The Australian National Survey of Mental Health and Wellbeing, conducted in 1997, estimated that 6.5% of the adult population of Australia have one or more personality disorders. Those with a personality disorder are more likely to be young, male, not married, and to have an anxiety disorder, a substance-use disorder or a physical condition as well as the personality disorder.
Women are more likely than men to be diagnosed with affective disorders, particularly depression.

Men are more likely to be diagnosed with substance-abuse disorders.

Mental illnesses are a major cause of chronic disability in Australia, and whilst they account for only 1% of all deaths, they are responsible for 27% of years lost due to disability.

De-institutionalisation has led to a reduction in psychiatric hospital beds in Victoria from 7,500 beds a decade ago to just over 300 beds today, and the same pattern is occurring across Australia.

Public housing and hospital care shortage means that many of the mentally ill are homeless.

Many mentally ill persons are unable to afford their prescribed medication and consequently experience a deterioration in their conditions.

Many mentally ill persons are unable to access appropriate psychiatric and other care in the community.

Acute episodes of mental illness can be brought on by stress. Financial distress can exacerbate mental illness and can also prevent full recovery.

The psychiatric case workers who assist seriously mentally ill people are often unaware of the benefits and availability of financial counselling.

It takes up to five years from the onset of a serious mental illness before the sufferer reaches their optimum level of managing their illness and finances.

With the right assistance in the early stages of mental illness, many can return to their normal workforce and families.

$1,000 per annum is available for the seriously mentally ill, in addition to social security, to assist them to live independently�

A Carer’s fund exists to help carers with expenses incurred in the care of a mentally ill person.

These facts were compiled from an article in the ‘Good Weekend’ of the Sydney Morning Herald (May 12, 2001), and from Mary Radisich from the Casey Cardinia Legal Service in Dandenong Victoria.

Remote Workers Teleconference

A teleconference for remote workers on the Commonwealth Financial Counselling Program (CFCP) was held on 6 June 2001 and financial counsellors from Cairns, Rockhampton, Townsville and Narromine through to Coober Pedy, Alice Springs, Katherine and Darwin were able to participate. It was a great opportunity to get this special group of people together.�

A number of issues were put forward for discussion and below is a summary of some of these. It is not meant to represent a complete analysis of the topics covered but instead gives a brief summing up of areas discussed.

Effective Education Programs

Gaining of trust and acceptance by communities can be very difficult for remote workers, particularly new ones to an area and one of the most effective ways of gaining that trust is through community education. These are some of the thoughts expressed during the teleconference :

School Education programs are a good access point to remote communities. School children are often open to learning and it can lead to contact with adults and the broader community in general.

Running programs for other community based organisations can be a good way of informing and educating others into what financial counselling is and can do for people of the community.�
Some groups are also open to learning about the basics of budgeting and managing finances and are then willing to take on these tasks to help an overburdened financial counsellor who may be trying to cover huge areas. Many financial counsellors who work in remote areas have enormous distances to cover - some the size of Victoria.
Learning by example is sometimes an effective way of teaching new concepts. Illustrating through case histories (suitably broadened to retain anonymity) can be most effective in getting a point across.
Informing people of their consumer rights was thought to be a most important part of any education plan.
Prioritising expenditure is a key part of most education programs and having written material to back up and illustrate this. Needs versus wants and informing people of the consequences of various options is essential.

Strategies for coping with Stress

Many financial counsellors operate under very stressful circumstances dealing with the pressures of people in crisis and the huge demands of caseload can be overwhelming at times. So how do you switch off and look after yourself?

Some techniques disclosed were:

Make a rule of keeping one day or afternoon free just to slow down a bit. One counsellor makes a rule of keeping Friday afternoons client free just to wind up the week and slow down for the weekend.
Treat yourself to a nice long lunch with colleagues or friends once a month - just relax and enjoy each other’s company. We all need to have a life outside work.
Everyone needs someone to dump on - not to solve problems but just to be able to listen in an empathic way.

Funding

Rosemary Delahunt, (Director) and Francis Foo from the Commonwealth Financial Counselling Program were able to join the first part of the teleconference and had this to say:

They fully appreciate the enormous efforts being made by all financial counsellors particularly during times when services are stretched to the limit.
Unfortunately there was no extra funding made available in the recent federal budget for the CFC program, but there are some developing policy initiatives like Family Law Pathways which may provide the opportunity to raise the profile of financial counselling services and help the arguments for additional resourcing.�
Rosemary was pleased to be able to talk to the remote workers and get to know some of their issues first hand. She stated that this would help her develop a greater understanding of their needs and enable her to project these to others when decisions are being made about funding.

Getting blood from a stone?
Basic bank accounts

by Louise Petschler

The banks have announced better basic accounts for social security recipients. Louise Petschler from the Australian Consumers’ Association, offers a brief overview.

Banking is an election issue – and the banks have noticed. Community outrage continues to run high. While the Government remains silent on the community’s banking concerns, the ALP is promising a social charter and (if needed) regulation, and the Democrats continue to argue for better services.�

We’ve seen some important advances as the banks try to embrace social obligations (and avoid regulation) – one of the biggest is a commitment to no interest, low fee “basic” accounts for consumers on social security.�

In April the Australian Bankers’ Association announced a minimum standard for basic accounts for consumers with a Commonwealth Government pensioner, health care or senior’s health care card with 6 free transactions a month (including 3 over the counter transactions), no account keeping fee, no interest paid, and no promises on passbook access or fee restraint once over the “fee free” limit. This minimum standard was setting the bar at a pretty low level. Since then individual banks have made stronger promises on “basic accounts”. A summary table of the offerings is below.

ANZ will offer an improved basic account from October. ANZ has also announced that all customers aged 60 and over will not pay transaction fees (account keeping fees apply). Unfortunately the ANZ basic account will not offer passbooks. ANZ is also developing a “customer charter”.

NAB will offer a basic account from August, with passbook options. NAB will also continue to offer its existing concessions and deeming accounts and has flagged work with other banks on things like low interest loans and accessibility.

Westpac’s basic account has less free transactions (6 a month) but is free of the mean-spirited 12 month relationship requirement that bars new customers from opening the NAB or ANZ accounts. Westpac also continues to offer deeming accounts and disability concessions, but has stopped passbooks to new customers.

Commonwealth has so far failed to improve it’s Commonwealth accounts and has told customers to move to the Woolworth’s EzyAction account for “basic” services. Recent comments by the bank’s CEO Mr David Murray suggesting that if the community keeps asking for fair fees or regulation then banks may limit services is a dangerous sign from the bank with the largest number of deposit accounts, and a warning that talk of social obligations might be more rhetoric than reality.

Moves on safety net account are welcome. But the fine print shows some problems:

ANZ and NAB are limiting their account to existing customers – with a mean-spirited 12-month relationship requirement before new customers join.
Basic accounts focus on pensioners and those with government concession cards. It’s about time the banks gave a fair deal to pensioners and those in financial need! But there’s no concessions here for others who do not qualify for exemptions. These accounts are also “no interest” accounts just for low balances.
Westpac has ceased offering passbook accounts to new customers – a poor response to the needs of those who rely on passbooks to manage accounts.
There have been no commitments made on fees generally – for example, in June the ANZ announced some increased charges, despite announcing its basic bank account less than a week before. No bank is promising broad fee restraint.
Commonwealth has the largest number of eligible customers, but promotes Ezybanking as its basic account. CBA should focus on where it has millions of accounts, not thousands, if it is serious about social obligations.
None of these initiatives address issues like maintaining face-to-face service, improving fee disclosure, or community reinvestment by the banks.

Basic accounts are important, and the task now is making sure they are put in place, promoted, and working – and not limited by exemptions or restrictions. For affordable banking to be a reality, however, we need a low cost account for all, and regulated standards. In the next issue of our policy journal Consuming Interest, ACA looks at the work still to be done (the article will be posted on www.choice.com.au ).�

ACA would welcome comments on basic banking to lpetschler@choice.com.au�

BACK TO BASICS - What the four big banks are offering

NAB
Concession Card Account

ANZ
Access Basic Account

CBA
Woolworths Ezi Banking Account

WESTPAC
Basic Account

Who qualifies?

Aged pensioners; Social Security recipients (must be NAB customer for over 12mths)

Those holding Health Care Card, Seniors or Pensioner Cards

No restrictions

Aged pensioners; Social Security recipients

Free transactions per month

13 over counter a month or 66 electronic

15 over the counter or electronic (unlimited for aged 60+)

55 in Woolworths stores , 5 at ATMs

6 over the counter or electronic

Account keeping fees & minimum balance

None

Fee charged after free transactions used up

$2.50 per transaction

$2.50

$3.00

Passbook

Yes

Cheque book

Yes

�

NOTABLE FACTS ...

�In a 1996 US poll, the reasons for bankruptcy were cited as follows:

‘Overextended’

29%

Health problems

17%

Employment problems

15%

Divorce

12%

Cannot stand debt collectors

In 1871, William Russel Frisbee founded the Frisbee Pie Company in Bridgeport, Connecticut.

Back in 1920, Frisbee pies became popular with students at Yale University. They discovered that not only could you eat the pie, but you could also play with the tin plate afterward.

It was another 30 years before the Wham-O Toy Company, fresh from its success with the hula hoop, would try to market a flying saucer toy. Wham-O called it the ‘Pluto Platter.

In 1959, a company executive heard about the game they played at Yale, and decided to change the product’s name from Pluto Platter to Frisbee.�

William Frisbee is remembered today, not for his pies, but for the aerodynamic properties of his pie tins.

Financial Counsellors have to deal with many small businesses going bankrupt. In the past month, says Greg Mowle, I have had to help:�

A plumber who went down the gurgler�
A paper manufacturer who folded�
An ice cream maker who went into liquidation�
A glazier who crashed�
A builder who went to the wall�
A clock maker who was wound up�
A laundry man who was taken to the cleaners�
An exotic dancer who went belly-up�
A bra manufacturer who went bust

I think we’d better stop there! Thks……..Ed

In the Media

Card policies do banks little credit

The credit card interchange fee to banks is crushing small businesses. A group of BP service station operators from northern NSW recently appealed to ACCC for help. One business sold one million litres of petrol on credit between December 1998-99. The credit card interchange fee to banks of 1.2 per cent cost the operator $9588 over the 12 months. He calculates that, over the 12 months to July this year, his one million litres on credit will cost him $13,600 in fees to the card providers – a 40 per cent increase.�

With the fee now at 1.9 per cent and with the GST, profit margins are being so eroded that the service station operator comes out with just 9c from a $20 transaction.

The Daily Telegraph, 14 May 2001 page 21

Customer fact files go to the highest bidder�

Databases of personal information given to companies during marketing campaigns or supermarket competitions can be traded legally, the Privacy Commissioner warned yesterday. The statement came after revelations that children as young as six had received pre-approved credit card applications in the mail.

Several more cases of the under-age credit offers came to light yesterday following a Herald report of a $3,000 Visa card being offered to a 10-year-old Croydon boy. Mrs Wendy Cayless, of Summer Hill, said her six-year old daughter Nicola (in Year 1) had been disappointed to find that her $2 weekly allowance would not stretch to repayments on a $3,000 credit card.

The NSW Privacy Commissioner, Mr Chris Puplick, said once consumers had committed their personal information to companies during marketing campaigns or when signing up for products, they had no control over the release of that information.

The Sydney Morning Herald, 8 June, 2001�

$170m computer fix for pension bungles

The Federal Government will spend $170 million upgrading Centrelink’s computer system in the coming Budget in an attempt to address serious administrative flaws that have seen new pension claims often wrongly assessed.

An Auditor General’s report found more that half of new pension claims were assessed incorrectly by Centrelink, despite assertions by the agency that less than 5 per cent were mishandled.

The Auditor General assessed 354 new applications for the pension and found 52.1 per cent were done incorrectly. In these cases Centrelink “could not assure payment at the right rate, from the right date, to the right person with the right product”

The Sydney Morning Herald 19 May, 2001

Mobile phone fees to rise for millions

Mobile charges are likely to rise following a Federal Government decision to more than double the cost of annual spectrum licence fees.

The licence price rise from $7 million to $17 million a year – applies to the GSM (global system for mobile) system used by 10.2 million, mainly metropolitan, Australians.�
A spokeswoman for Vodafone said the $10 million increase inevitably would be passed on to consumers with GSM phones.

The Sydney Morning Herald, 18 May 2001

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