Credit where credit isn't due? Time for all banks to ban the use of credit cards for online gambling
The Australian banking industry is rightly trying to rebuild community trust after the shocking evidence heard by the Hayne Royal Commission into financial services.
The banking industry is talking up a new code of practice that came into force earlier this month, which is welcome provided the Federal government acts on the full recommendations of the Royal Commission to give better protections to customers.
However, the banks can further their own cause – and help rebuild community trust – by following the tough line of Macquarie Bank in this week banning the use of their branded credit cards for gambling.
U Ethical – a leading ethical investment manager and strong advocate for positive change -– has pushed the largest Australian banks to address the scourge of online gambling over the past three years, partnering with a broad coalition of investors, the Responsible Investment Association of Australia (RIAA), social justice groups and consumer activists who believe that allowing online gambling on credit cards is irresponsible. If someone can't use their credit card for a poker machine, surely they shouldn’t be able to use one for online gambling?
We don't invest in gambling companies like Tabcorp and Aristocrat Leisure. We do have shares in the major banks and don’t believe they should permit gambling on credit.
The problem of allowing credit cards to be used to fund gambling is compounded because they are typically recorded as cash advances, where interest charges begin immediately at rates of more than 20 per cent.
An engagement campaign with the major Australian banks over several years has led to improvements in hardship programs and monitoring transactions to identify problem gambling. CBA, Westpac and NAB allow credit card holders to request blocks on gambling transactions, while ANZ has a "speed bump" which puts a block on the card when 85 per cent of its limit is spent or a certain number of transactions are made.
From July 1, Macquarie Bank has blocked the authorisation of transactions that are classified under the gambling merchant category code through an EFTPOS terminal and online. This might not pick up gambling and lottery transactions where the primary business is not gambling, or many club and pub pokies operators.
The Alliance for Gambling Reform, led by Reverend Tim Costello, has hailed Macquarie's decision as setting a new benchmark for bank social responsibility, in a country which has the world's biggest gamblers in per capita terms, racking up $24 billion in losses per year.
It plans to continue its engagement with the four major banks – CBA, NAB, ANZ and Westpac – calling on them to commit to matching the Macquarie move before nominations close for board elections and AGMs later this year. Macquarie will come in for public praise, but what about the others?
Last year, Federal and State governments worked together to ban credit betting where the gambling company provides the finance, so why can’t they take a similar regulatory approach on credit card betting?
Why can’t the major banks follow the lead of Macquarie and institute a total ban on providing credit for gambling? The changed terms and conditions on Macquarie's credit cards are a step in the right direction.
In the wake of the Royal Commission, the banks and their industry body, the Australian Bankers Association, said they had heard the message about listening to community and customer concerns.
They should follow these words with action, including a ban on using credit cards for gambling.