Senate debates

Monday, 22 February 2016


Competition and Consumer Amendment (Payment Surcharges) Bill 2015; In Committee

10:48 am

Photo of Peter Whish-WilsonPeter Whish-Wilson (Tasmania, Australian Greens) Share this | | Hansard source

I wish to move amendments, but I actually seek clarification from the Clerk as to exactly how I move these, because I still do not have a schedule in front of me.

The Acting Deputy President:

I advise that there is not a running sheet. You can by leave move all your amendments together.

10:49 am

Photo of Peter Whish-WilsonPeter Whish-Wilson (Tasmania, Australian Greens) Share this | | Hansard source

by leave—I move all Greens amendments on sheet 7841 together:

(1) Schedule 1, item 2, page 3 (after line 27), after subsection (2F), insert:

  (2G) In addition to the effect that this Act (other than Parts IIIA, VIIA and X) has as provided by another subsection of this section, this Act (other than Parts IIIA, VIIA and X) has, by force of this subsection, the effect it would have if:

(a) each reference in Part IVD to an ATM transaction were a reference to an ATM transaction that occurs:

     (i) by means of a postal, telegraphic, telephonic, or other like service (including electronic communication); or

     (ii) by means of an automatic teller machine provided by a bank (other than a State bank), or any other institution engaged in banking, in the course of banking (within the meaning of section 51(xiii) of the Constitution); and

(b) each reference to a corporation included a reference to a person not being a corporation.

(2) Schedule 1, item 3, page 10 (after line 32), after Part IVC, insert:

Part IVD—ATM transactions

Division 1—Preliminary

55P Object of this Part

     The object of this Part is to ensure that:

  (a) account holders are not charged for ATM transactions made using automatic teller machines owned or leased by the persons with whom their accounts are held; and

  (b) amounts charged for other ATM transactions:

     (i) are not excessive; and

     (ii) reflect the reasonable costs of allowing a person to make an ATM transaction.

55Q Definitions

     In this Part:

  ATM transaction means a cash deposit to, a cash withdrawal from, or an enquiry about the balance of, an account that is made by means of an automatic teller machine.

55R Part not to apply to State banking

     This Part does not apply with respect to State banking that does not extend beyond the limits of the State concerned.

Division 2—Limit on charges for ATM transactions

55S Limit on charges for ATM transactions

No charges for ATM transactions made using own -branded ATMs

(1) A corporation must not, in trade or commerce, charge a person an amount (however described) for making an ATM transaction if:

  (a) the corporation is an ADI (authorised deposit-taking institution) for the purposes of the Banking Act 1959; and

  (b) the transaction relates to an account held by the person with the corporation; and

(c) the automatic teller machine used to make the transaction is owned or leased by the corporation.

ATM transactions made using foreign ATMs must not be excessive

(2) A corporation must not, in trade or commerce, charge a person an amount (however described) for making an ATM transaction that is excessive (see subsection (3)) if:

  (a) the corporation is an ADI (authorised deposit-taking institution) for the purposes of the Banking Act 1959; and

  (b) the transaction relates to an account held by the person with the corporation; and

(c) the automatic teller machine used to make the transaction is not owned or leased by the corporation.

(3) For the purposes of subsection (2), an amount charged for making an ATM transaction is excessive if the amount exceeds the amount permitted by a standard determined under section 18 of the Payment Systems (Regulation) Act 1998.

(4) For the purposes of subsection (3):

  (a) the Reserve Bank of Australia must ensure that there are at all times in force standards under section 18 of the Payment Systems (Regulation) Act 1998 permitting amounts for the purposes of subsection (3); and

  (b) the making of such standards is taken to be in the public interest; and

(c) an amount permitted for an ATM transaction must reflect the reasonable costs of allowing the person to make the transaction.

55T Acquisition of property


(1) This section applies to the following provisions of this Act:

  (a) section 55S;

  (b) any other provision to the extent to which it relates to section 55S.

Effect of provision

(2) The provision has no effect to the extent (if any) to which its operation would result in the acquisition of property (within the meaning of paragraph 51(xxxi) of the Constitution) otherwise than on just terms (within the meaning of that paragraph).

(3) Schedule 1, item 4, page 11 (line 2), after "55B,", insert "55S,".

(4) Schedule 1, item 5, page 11 (after line 5), after subparagraph (ia), insert:

     (ib) section 55S;

(5) Schedule 1, item 6, page 11 (line 7), after "55B,", insert "55S,".

(6) Schedule 1, item 7, page 11 (line 9), after "55B,", insert "55S,".

(7) Schedule 1, item 8, page 11 (after line 12), after subparagraph (iia), insert:

     (iib) section 55S;

(8) Schedule 1, item 9, page 11 (line 14), after "55B,", insert "55S,".

(9) Schedule 1, item 10, page 11 (line 16), after "55B,", insert "55S,".

(10) Schedule 1, item 11, page 11 (line 18), after "55B", insert "or 55S".

(11) Schedule 1, item 12, page 11 (line 20), after "55B", insert "or 55S".

(12) Schedule 1, item 13, page 11 (line 22), after "55B", insert "or 55S".

(13) Schedule 1, item 14, page 11 (line 24), after "55B", insert "or 55S".

(14) Schedule 1, item 15, page 12 (line 3), after "55B,", insert "55S,".

(15) Schedule 1, item 16, page 12 (line 5), after "55B,", insert "55S,".

(16) Schedule 1, item 17, page 12 (line 12), after "55B", insert "or 55S".

(17) Schedule 1, item 18, page 12 (line 19), after "55B", insert "or 55S".

As I made clear during our speech on the second reading, we support in every sense of the word the motivation behind this bill—the response to the public outcry over excessive fees being charged when using credit cards for a range of different services. I raised with the minister the issue that banks are making around $600 million a year in profits from ATM fees. If credit card operators are not allowed to make a profit from the use of the card, neither should banks. Does the minister agree with that in terms of ATMs? We use credit cards for ATMS.

10:50 am

Photo of Simon BirminghamSimon Birmingham (SA, Liberal Party, Minister for Education and Training) Share this | | Hansard source

I will attempt to deal with the overall issues that are raised in relation to the amendments that Senator Whish-Wilson is proposing, to put the remarks on the record and in context. Then we can deal with any other specific issues if need be.

It is important to note a little bit of background. In 2009 the Reserve Bank of Australia led reforms to ensure there was transparency in ATM fees. Prior to those reforms there was no transparency around ATM fees. It is important to distinguish what ATM fees are as distinct from the practice we have seen in relation to merchant fees that have been passed on. The fee for ATM use is a fee for service. Before someone withdraws money from an ATM they have the choice to pay the fee for that service or find an alternative ATM that does not charge a fee. There are a range of different services at different fee levels, including free services, depending on your financial institution, that are available to customers in the ATM market. Genuine competition exists there. Estimates are that the RBA reforms have led to savings of around $270 million from ATM fees between 2009 and 2011. It is notable that the use of ATMs is gradually declining with the greater take-up of electronic payments and the cash-out facilities in stores.

The credit card surcharge legislation that is before us today is implementing the important work undertaken by David Murray as part of the Financial System Inquiry. The FSI did not make any recommendations in respect of ATM fees. The government's surcharging ban targets misleading conduct by merchants who charge a fee under the guise of passing on a credit card payment they incur to accept a card. That is an important point to emphasise. We are targeting misleading payments where consumers face a fee, allegedly associated with conducting a purchase by credit card, that is not a genuine, real or accurate reflection of the cost of that fee.

Conversely, ATM fees are disclosed in advance and are fees charged for a specific service, namely, the use of that ATM. They are not presented as the cost of somebody else in that regard, unlike misleading conduct in relation to merchant fees. They are different issues. The measures contained in this bill are the result of extensive work and broad consultation, and they really tie back to the Financial System Inquiry, which did not, as I indicated, touch on the relationship with ATM fees.

10:53 am

Photo of Peter Whish-WilsonPeter Whish-Wilson (Tasmania, Australian Greens) Share this | | Hansard source

I think that at the heart of this bill, and it goes hand in hand with what you just outlined about misleading or deceptive conduct, is the concept of what is an excessive surcharge or an excessive fee. When I use my credit card at a shop pay a fee I am paying a fee for service as well. There is no difference whether I go to an ATM and look at my bank account details or I use my credit card to facilitate a transaction in a shop. Either way, you are getting a fee for service. The question I would like you to answer, minister, is: if we know from the Reserve Bank that the cost to a bank of providing an ATM service is on average around 77c, do you think that fees of $2 or $3, for example, that allow the banks to make $600 million profit a year from the Australian people are excessive? If you do, there is no reason you would not extend this bill to include the provision of services from ATMs. Could you please tell me whether you think banks have excessive fees on ATM services?

10:54 am

Photo of Simon BirminghamSimon Birmingham (SA, Liberal Party, Minister for Education and Training) Share this | | Hansard source

Senator Whish-Wilson, I think you either misunderstand or seek to misconstrue the core nature of this bill. You said it is dealing with excessive fees. What I would draw your attention to is that it deals with misleading fees, and there is a clear distinction between the two. In relation to the merchant surcharge, what the legislation we are dealing with here seeks to address is where merchants present a fee that is related to the use of a credit card in the purchase of a good or service and the merchant presents that fee as a pass-through of costs incurred from the financial institution that provides the facility for them to take the credit card payment. Here we are seeking to deal with instances where that pass-through is grossly inflated and the consumer is being misled into thinking that it is a pass-through of that cost, whereas in fact the merchant is trying to make an additional profit on the manner in which the individual pays for the good or service.

That is quite different from the ATM context where, of course, the ATM is usually owned by the institution that puts the ATM in place and the fee charged to the consumer for accessing funds from that ATM is directly applied for the service of using the ATM. It is a different matter in that regard. We could come into this chamber every day and you could seek to ask me hypothetical questions about what an appropriate profit margin is for a different private business selling a different good. I do not think it is the role of government to be defining what appropriate profit margins are and what is excessive or otherwise. We have consumer law that seeks to account for misleading practices, abuse of market power and a range of other things, and to protect consumers in that regard, but in this case we should not think it is a straightforward and analogous comparison to look at merchant fees and ATM fees and say they are one and the same problem. They are quite different matters, and it would be wrong of the Senate today, without having undertaken consultation or the proper processes that led to this legislation, to get ahead of the game and do something else in relation to ATM fees.

10:57 am

Photo of Peter Whish-WilsonPeter Whish-Wilson (Tasmania, Australian Greens) Share this | | Hansard source

Senator Birmingham, you made my case for me in what you just said. Do you think most Australians understand, when they use an ATM, that it costs only 77c to process that transaction? Do you think they understand, when they pay two or three dollars, that they are getting a fair and reasonable deal out of the banks? Do you think they know they are being gouged by the banks? The point here, which you just raised and which I also raised, is that the fact that the banks charge $3 for a transaction that actually costs them only 77c could be construed by many people in this country as misleading and deceptive.

If you go back to the original RBA ruling in 2012, credit card surcharges were meant to have been limited to the reasonable cost to the business of processing the transaction, which for Visa and MasterCard was about 0.8 per cent and for American Express and Diners Club was about two per cent. We realise that there have been charges well in excess of that, especially by airlines. There have been some examples given in evidence. I think in one case Tigerair charged, for a $132 air ticket, a surcharge fee on a credit card transaction that ended up being inflated by nearly 1500 per cent. Isn't the same principle that is applied to credit card fees applied to the use of ATM machines? At the end of the day, Australians do not realise the profits the banks are making on this. Many would consider them excessive. Why can't we extend this principle to the use of physical infrastructure for processing a payment, whether it is an ATM, or EFTPOS in a shop? You have broadband, you have copper wires, you have all the same things in place for both systems: they both involve, essentially, an electronic service. We know the banks are making $600 million or more a year in profits from the use of ATMs. Let us take the reasonable principle that is in this bill and that we agree with and let us apply it to probably one of the biggest rorts that we see in this country, which is the profits banks make on ATMs.

They are even charging their own customers fees. Interestingly enough, I notice Bendigo Bank are charging 70c per transaction to their own customers now to cover the provision of that service. If that costs Bendigo Bank 70c, and the Reserve Bank said it cost 77c, how can anyone stand here and not say the current fees are excessive, and it is misleading and deceptive if the Australian people think that it costs the bank $2 or $3 to provide that service? Clearly, it does not cost them $2 or $3. And I do not see why we cannot apply the same principle to credit card payments.

11:00 am

Photo of Simon BirminghamSimon Birmingham (SA, Liberal Party, Minister for Education and Training) Share this | | Hansard source

Senator Whish-Wilson asked if I think Australian consumers know that banks are making profits. Yes, I think Australian consumers know that Australian banks make profits in all manner of different ways! Certainly, the people that I meet as I go about my daily business in engagement with constituents are well aware that banks make profits. They also know that when they go to use an ATM, if it is an ATM of a bank they do not bank with, there may be a fee attached to that because of the reforms by the RBA, but they know that fee up-front. They then have a choice as to whether they get their cash out from that ATM or they go to another ATM; whether they go to the ATM of an institution with whom they do bank, where they might be able to take their cash out for free; or whether they go and use an EFTPOS facility while they are doing their shopping, where they may be able to take their cash out for free.

Senator Whish-Wilson, you raised an interesting point with your examples. You gave an example relating to Tiger Airways. Now, I am not aware of the details of that, so I will take it as a hypothetical example, but it does highlight exactly why the government are taking the action we are taking in relation to merchant fees. We do not want to see retailers or providers of goods and services of any description misleading consumers when they say they are recouping the cost to them of processing a payment by credit card as against some other means. We want to eliminate that misleading practice, whereby some are seeking to make a profit for themselves out of that. But I again draw the distinction that that is a misleading practice; that is not what is occurring in the ATM market, which is a fee-for-service practice.

Senator Whish-Wilson, you also raised the example of Bendigo Bank applying a pass-through of costs to their consumers. Of course, in many instances where banks are providing free withdrawals of money from ATMs, they are notionally making a loss on those ATMs—just as, where the transaction incurs a cost, as you have highlighted, they might be making a profit on them. In net terms, they may make a profit out of the ATMs, depending on how you define it and deal with the capital costs et cetera that are there.

If your amendments were to go through, Senator, I imagine one of the risks in terms of the consequences would be that institutions who were no longer able to provide preferential treatment to their customers—as distinct from the customers of another banking institution—might decide that they will charge everybody a flat rate. You could in fact create a circumstance that is to the disadvantage of many consumers of existing institutions. That is a potential risk. It may or may not occur. The problem with amendments like these, were they to be passed in this manner, is that we have not fully explored any of the potential impacts that could occur.

I again emphasise that the issue in relation to ATM fees is very different from the types of merchant fees and practices that we are seeking to stamp out through this legislation.

11:04 am

Photo of Peter Whish-WilsonPeter Whish-Wilson (Tasmania, Australian Greens) Share this | | Hansard source

The Senate Economics Legislation Committee did hear evidence on credit card surcharges through ATMs—and I will call them surcharges. I come back to the point that this is about dealing with excessive surcharges, excessive fees. That is the whole principle behind what we are doing with credit card surcharges on other transactions, except for those through ATMs.

I want to outline what our amendments would do. A new division will be created in the bill which puts a limit on ATM fees. Firstly, it does so by banning any fees charged by banks for the use of their own ATMs, as we have heard Bendigo Bank and Adelaide Bank are doing, because we believe very strongly that if a bank is getting your money you should not be charged for the privilege of accessing it in getting it out of an ATM, which reflects the practice by pretty much all of the banks. Secondly, it requires the Reserve Bank to issue standards in relation to ATM fees charged by authorised deposit-taking institutions that will take into account the public interest and limit those fees to an amount that reflects the reasonable costs of allowing the person to make the transaction. This means that authorised deposit-taking institutions—in other words, the big banks—will be prevented from charging fees that are excessive and do not reflect those standards. We want to take the same principle for credit cards that is outlined in this bill, which we support, and make it applicable to ATMs.

Very quickly, just to finish off, it has been my experience in life—and I think most Australians would agree with me—that it is not always the case that you can find an ATM that is your bank's. Certainly, in big cities and other places, there is a choice; within a kilometre, you will be able to find other ATMs. But, if you are in a country town or any rural and regional areas, you can end up having to pay through the nose. There is not a lot of choice in some of those areas, where a lot of Australians live. And sometimes it is not convenient, especially if you are not as mobile as other people and you have to take public transport or you have trouble walking. There are all sorts of issues there. So it is not exactly clear cut, like it would be in an economics experiment, that you are a rational consumer of these services and you can make a choice. That is not always the case.

Anyway, we are saying it is reasonable for banks to recoup this cost. We are saying that is reasonable. What we are suggesting is not reasonable is that they are making excessive profits by gouging the Australian people when they use ATMs. We would like to crack down on that, and this is the perfect opportunity

We did hear evidence on it. If we pass these amendments today and we see the transfer of $600 million from some of the most profitable financial institutions in the world back to the hip pockets of Australian people, I think the people will thank the Senate for it. I ask the committee to give favourable consideration to these amendments moved by the Greens and do the right thing.

11:07 am

Photo of Sam DastyariSam Dastyari (NSW, Australian Labor Party) Share this | | Hansard source

I have one or two questions that I want to ask at this stage. But before doing so I did want to draw some attention to the amendments that are being proposed by Senator Whish-Wilson. I want to begin by saying that the intent of these amendments is something that, broadly, most people support—that is, the principle behind the idea that you do not want people being ripped off by unfair ATM fees. I think that is a very good principle.

There is a real issue about competition within the market in this space. In particular, if I walk down the main street of Sydney to use an ATM, I can find ATMs that are around $2 or even cheaper. If I go to outback communities—and there was some talk that this has come up in some of the more remote Indigenous communities—it can be up to $3.50 for people to be able to use an ATM. You end up with a situation where people who are simply checking their balance on two or three occasions will end up suddenly spending $10, $12, $15 of their revenue just checking and waiting for payments to come in. These things add up very quickly, so there is something worthwhile in the broader principle of what you are saying.

There are a couple of reasons why the opposition did not support this in the House. As I am sure everyone here is well aware, these are the identical amendments that were introduced by Mr Bandt in the other place. The main reason was that there was no notice of major regulatory change or its significant impact on business. The amendments have the effect of regulating ATM fees. This is a completely different direction to the main thrust of this bill, which deals with credit card payment surcharges. There was an entire, lengthy process that we went through as a Senate through the Senate Economics References Committee—and I want to commend Senator Whish-Wilson on the incredible amount of work he has done on that committee. There would have been a much better and more appropriate opportunity to have thoroughly explored some of these ideas as part of that committee process.

Again, the points you are making are broadly, at a principal level, valid. But I believe there was a better way of doing this to bring industry on board and to have the debate and the discussion. The way that it should have been done was through the process that the Senate did establish, which was our committee process. I think it is unfortunate that we did not have the opportunity to really explore some of this in depth through that process. I do feel that there is, dare I say it, an element of grandstanding going on here with some of these amendments. But I would never be so outrageous as to accuse a senator of that!

The thrust of this bill deals with another matter, which is credit card surcharging. I note, Minister, that you are acting in the capacity at the moment, so this is not your bill per se. It is not a matter that you have directly been involved in, having a large portfolio like education, so I completely understand that you may or may not be able to answer some of this. But I did want to ask if, in the drafting of this legislation, the department did have an opportunity to look at, or take on board, any of the recommendations from the Senate inquiry into credit card use.

11:11 am

Photo of Simon BirminghamSimon Birmingham (SA, Liberal Party, Minister for Education and Training) Share this | | Hansard source

Thank you for the question and the overall comments—and for allowing us all to reflect on whether or not the pot at one stage there was calling the kettle black about grandstanding. But, in relation to your question, my understanding—and correct me if I am wrong here—is that the Senate inquiry looked more at matters relating to interest rates and the costs to consumers associated with that, which is distinct from these matters around merchant fees, which stem very directly from the Murray financial services inquiry. So, in a similar way to the answer I gave to Senator Whish-Wilson about ATMs, the two are distinct issues.

11:12 am

Photo of Sam DastyariSam Dastyari (NSW, Australian Labor Party) Share this | | Hansard source

You are right that a big focus of the inquiry was related to credit card interest rates and credit card interest payments. You are correct. That being said, though, there was quite a bit of work done on other types of payments. There was specifically within the terms of reference, I recall, reference to ATM fees, which we are here today discussing in an amendment before us, but it did not come up, there were no witnesses provided and it was not the focus of the inquiry even though there had been an opportunity to have had that debate in a different place.

What you are saying is in part true, and I do not in any way, shape or form think that you are intentionally saying the wrong thing. The focus was around credit card interest rates. But if you look at the terms of reference there was a specific one looking at certain matters like fees. We had quite a look at the payment system and how the payment system as a whole works. The system itself has quite a few different complexities around how secret or hidden payments are made, and there was quite a bit of evidence from Visa, MasterCard and others around disclosure and transparency on that front. So while you are correct that perhaps the headline focus of the inquiry was around credit card interest rates, there were a whole lot of other matters relating to payments that were explored through the process.

11:14 am

Photo of Simon BirminghamSimon Birmingham (SA, Liberal Party, Minister for Education and Training) Share this | | Hansard source

My understanding on advice is that the Economics References Committee report was released in December 2015. This legislation had already been introduced into the parliament by that stage. Senator Dastyari, I note in your second reading contribution some concern about the time taken to bring this legislation forward. I am sure you would not have wanted to see a further delay to it in that regard. Of course, as with all Senate inquiries, the government will give appropriate consideration to all of the recommendations made and will officially respond in due course.

11:15 am

Photo of Sam DastyariSam Dastyari (NSW, Australian Labor Party) Share this | | Hansard source

I will take that as a positive indication of where the government sits in relation to the report. I want to stress that these are good changes. This is a good set of laws. These are good reforms. What makes them such good reforms is that they are practical, they are sensible and they are achievable. I would urge the government to take the opportunity to look at where the committee got to with its recommendations, where it tried to follow the same kind of spirit and principle of what has been recommended here. Rather than look at some of the more drastic or politically contentious issues around banking, which I do believe exist, the committee looked at the practical steps that could be taken to reform the credit card market and make it a more competitive space. That is what I think this bill does.

There are a series of other practical, sensible measures that can be looked at. I note the point that Senator Whish-Wilson and the Greens have made here—and I hope I am not incorrect in saying that I heard Senator Di Natale talk about this matter earlier—and that is making sure that ATM fees are not excessive. I think there will be an opportunity at a future date to have a proper discussion about this. I also note that an important reform in the last government was allowing people to see the payments for themselves, to know what it was costing them. When you use your credit card at an ATM and that little button comes up saying that this transaction will cost you $2, this is actually the kind of step we should be looking at to empower and inform consumers. It is important to make consumers physically take the step of pressing the button so that they know what they are paying for that transaction.

The points that Senator Whish-Wilson makes are very important. Firstly, people are not really aware of what a transaction actually costs. So far, we tell them what it costs them; we do not tell them what it actually costs. That is an important point. Secondly, it is important to address markets that are not competitive. If I walk down the main street of Sydney, I can go to the CommBank, ANZ, National Australia Bank or Westpac. The big four banks are within 30 metres of each other. If I am in a remote Indigenous community where there is only the general store, I have no opportunity. There is no competition. Anecdotal evidence is that in fairly disadvantaged Indigenous communities it can cost up to $3.50 to make a transaction, whereas it would cost $2 to do the same transaction in George Street, a main street in Sydney. This is obviously of concern. There has to be a way of properly addressing this. The proposal that is being presented by the Greens at this point in time is a way to address it. I do believe that there is some merit in properly addressing this issue and having a further look at it at some point in the future.

Photo of Glenn SterleGlenn Sterle (WA, Australian Labor Party) Share this | | Hansard source

The question is that amendments (1) to (17) on sheet No. 7841 be agreed to.