"I'm from the government, and I'm here to help you." According to Ronald Reagan, these are the most terrifying words in the English language. And you can see why as Australians grapple with changes to credit card surcharges.
The incoming ban was supposed to save consumers $1.56 billion, but restaurants and coffee shops are raising prices to compensate. Taxi companies are charging up to 5 per cent as a "service charge", while some institutions are refusing credit cards for school fees, council rates and tax payments. Meanwhile, banks have increased annual fees and slashed reward points. Where are the promised savings?
Here are three simple changes the government could make, at little cost, that would transform thousands of lives.
ONE
Banks freezing customer accounts without warning has dominated talkback radio since I wrote about it a fortnight ago. It's a financial cyberattack, except the banks are attacking their own customers. Suddenly, people can't access their money, pay bills or run businesses. Their only remedy is hours on the telephone or queuing at a branch. Imagine a small business owner unable to pay staff or suppliers, forced to abandon his business for hours to resolve a problem entirely of the bank's making.
My inbox has been flooded with horror stories, but one takes the cake. A friend was discussing with the Commonwealth Bank whether her family trust was called "XYZ Trust" or "The XYZ Trust". While discussions continued, the bank froze her account. Who decided that a dispute over a three-letter word justified denying someone access to their own money? The arrogance beggars belief.
Consider electricity companies. They must give registered customers dependent on life-support equipment advance warning of planned outages. Yet banks can cut off someone's financial lifeline without warning. If electricity companies must take precautions before interrupting power, why shouldn't banks have similar obligations before pulling the financial plug?
Banks must comply with anti-money-laundering laws, but that's no excuse for treating customers like criminals. Legislation should require every reasonable attempt at communication before freezing accounts, except where immediate action is legally required or necessary to prevent fraud. There must also be a fast, direct way to resolve problems.
Banks make billions from their customers. Allowing them access to their own money, unless there's a compelling legal reason otherwise, is basic decency.
TWO
Borrowers are urged to shop around for better mortgage rates, but there's a trap for those without a 20 per cent deposit: lenders mortgage insurance, which can cost more than $20,000.
Suppose you've paid $20,000 in mortgage insurance on your ANZ loan and discover CBA offers a better rate. You decide to switch. Same borrower, same property, same risk. But the insurance isn't transferable between banks, so you could face another $20,000 premium.
The result? Borrowers become prisoners of their lender until they've accumulated enough equity to avoid insurance. And the banks know it. The solution is obvious: legislate to make lenders mortgage insurance transferable without another premium.
THREE
Among Australia's most vulnerable people are older renters, particularly single women who have escaped domestic violence or never owned a home. As rents soar, returning to work can actually make matters worse.
Take Margaret, 67, with virtually no assets and rent of $400 a week. Rent assistance of $111.90 reduces this to $288.10. Her full age pension of $32,180 brings annual income, including rent assistance, to $37,999.
Suppose she takes a $45,000 job. Once assessable income exceeds $226 a fortnight, her pension falls by 50 cents in the dollar. The Work Bonus exempts $7,800 annually, with a possible additional $4,000 credit. Even so, Centrelink assesses $33,200 of her wages, reducing her pension by around $530 a fortnight to $18,518 annually.
Then comes tax. Her salary and pension produce an estimated tax bill of $10,298. Combined with lost pension, working costs her $23,960 - more than half her wages - and leaves her over $11,000 worse off.
Contrast the Wilsons, who own a $3 million home, have $800,000 in super and $50,000 in lifestyle assets. They receive a $21,138 part pension, enjoy concession cards and withdraw $80,000 tax-free from super. Because Centrelink deems their super to earn just $27,788, they can earn another $52,863 from work without losing any pension.
Welfare turned upside down. The government should urgently ease the pension income test for older renters. These people want to work, need the money and have something to contribute. Instead of punishing them, we should encourage them. Surely that's what good government is supposed to do.
