Credit's Getting Simpler

Sun Herald

Sunday December 9, 2007

By Daniel Dasey and Michelle Taverniti

CONSUMERS will soon be able to pay for goods at hundreds of retail outlets with a simple wave of their credit card as smart card technology not requiring a signature is rolled out across NSW.

The Commonwealth Bank has announced it expects hundreds of businesses, including McDonald's, Caltex and IGA, to adopt its PayPass technology in 2008. To make a payment up to $35, a consumer just taps a silicon-chip embedded credit card - or mobile phone - on a scanner and the amount is automatically deducted.

In a trial last month, credit chips were also inserted in mobile phones that enabled owners to likewise "tap and go" for purchases.

But the increasing ease with which cards can be used is expected to worsen the country's credit problem.

Figures showing our collective card debt could hit $43 billion - or more than $2000 for every Australian - by the end of this month have created concerns for the fledgling Labor Government and prompted warnings from consumer groups.

The nation's new Assistant Treasurer, Chris Bowen, announced yesterday he would examine the issue of banks sending unsolicited credit increase offers to customers.

Mr Bowen said he was concerned consumers unable to afford credit were receiving offers that would place them even further in debt.

"The idea is making sure that the financial services providers are not writing to people already over their heads and offering them more [credit]," Mr Bowen said.

Michael Gleeson, from the Commonwealth Bank, said the PayPass system was being phased in across the state following trials on the Central Coast, Wollongong and in Sutherland.

"The card never leaves your hand. As a result of that, the chances of fraud are virtually eliminated," he said. "It's far more secure technology. There are no consumer repercussions at all. In the event that the card is lost, stolen or inappropriately used, the bank assumes the risk, not the consumer."

Mr Gleeson said 33,000 PayPass chips had been distributed in 40 trial locations. "There was no instance of fraud at all," he said.

The most recent Reserve Bank figures show Australians owed $41.1 billion on their credit cards at the end of September, up $4 billion, or more than 10per cent, from the September 2006 figure of $37.1billion. The December 2006 debt was just under $39 billion, suggesting Australians will owe $43 billion by month's end. The amount owed on credit cards has close to tripled since 2000. Card spending typically blows out $1 billion in December alone.

Two of the country's leading consumer groups have called for tougher regulations for banks making unsolicited offers of credit increases.

Their calls come as Insolvency and Trustee Service Australia figures reveal a 16.9 per cent rise in insolvencies across Australia. Excessive use of credit cards was a key driver of bankruptcies, after being unemployed. Figures up to the end of June showed 25,238 people went bankrupt last year.

Katherine Lane, from the Consumer Credit Legal Centre, said families were struggling to make credit-card payments after being hit by a fiscal "triple whammy".

"First there's inflation - things are costing more," she said. "Then we have higher debt and then higher repayments on the debt because of the interest rate rises. It's a recipe for financial hardship."

Ms Lane said the legal centre telephone counselling service typically handled 12,000 calls from people in credit trouble each year and was unable to respond to a further 300 to 500 a month. Christopher Zinn, spokesman for the Australian Consumers' Association, agreed something needed to be done about the number of credit offers people were receiving.

"There's all kind of inducements and seductions," he said. "What they never tell you is the stories of people who went for the offer and were unable to service the loan."

Mr Zinn warned families to think twice before going over their head on credit. "There are some people who carry debt for almost the whole year until the next Christmas," he said.

Dollar dazzler not helping consumers: Page 38

The credit kings

The banks holding our credit-card debt

Westpac $7.1 billion

Commonwealth bank $6.9 billion

ANZ $6.3 billion

Westpac $4.6 billion

Citi Bank $2.9 billion

No signature: open to fraud or about time?

"Signing is useless. This would definitely save time."

Jeff Lack

"Excellent idea - it would avoid an identity crisis. Same as an Eftpos card. I'd definitely use it."

Marie Williams

"I think it's a really bad idea. I understand what they're trying to do. I'm really conscious about my card and fraud and I'd be hesitant to accept that technology. Realistically, it would only save about 30 seconds in processing time."Lisa Cipriani

26, Gladesville

"I think it would be a catastrophe. If the card's out, you don't get a chance to have a second thought. If it was Eftpos, I'd do it. I'm trying to get rid of my credit cards, not add more features."

"I don't think it's a good idea. You need some sort of checking device. If I lost my wallet, I'd worry."

Jan Adcock

40-something, Rushcutters Bay

"People can swipe your card. I'd be worried about security."

Chris Pratt

20, Queanbeyan

"Yeah, it'd be great. It's a pain having to sign. I just got a new Visa credit card with a chip in it but I haven't used it yet."

Helen Bouropoulos

40, Surry Hills

"It's open to fraud. When you sign a signature, who looks at it really? People are so laissez-faire about credit cards nowadays."

Sean Hatton

34, Newtown

"I wouldn't use it, there's no security. No one's going to check it."

Rozlyn McCormick

24, Campbelltown

"Sounds dodgy - it sounds way too easy."

Stewart Anderson

26, Bondi

© 2007 Sun Herald

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