Special Counsel appeared for National Australia Bank agreed in the court, the confessional letter from Commonwealth bank CEO, all confirm interest charged on ALL lending products are compounding monthly.
Globally no competition between lenders in applying the repayments to Principal & Interest in different ways. All apply first fully to interest. Is that not a conspiracy/cartel/ anti competitive arrangement?
It is a conspiracy, not an error. When CEO confirms in writing, but senior managers wrote that they charge only simple interest, is it negligence?.
Banks and other lenders are continuously violating (over 50 years) section 52 and 54 of Trade Practices Act.
Section 54 is a Criminal penalty provisions, for anti competitive behaviour. There exists un/spoken un/written 'Cartel' among suppliers of goods and services in banking industry. Commonwealth CEO wrote that compound interest is INDUSTRY PRACTICE!!. So there is a 'communist' behaviour in this matter and NO competition AT ALL among them (makes us wonder if we are in communist regime or a 'competitive market' based economy!
“A false, misleading and deceptive conduct”: as per section 52 of Trade Practices Act 1974 or section 9 of Fair Trading Act 1999 (a mirror state wide legislation reflecting the contents of federal legislation 'Trade Practices Act').
Section 9 of Fair Trading Act 1999 reads as follows; "A person must not, in trade or commerce, engage in conduct that is misleading or deceptive or is likely to mislead or deceive".
Section 8 (c) of Fair Trading Act 1999; "whether the purchaser was able to understand any documents relating to the supply OR possible supply of the goods and services".
As proved in the court that the lenders knew it all that they are compounding monthly, but NOT disclosed. If their own senior managers do not understand that compound interest is charged, how can a common man understand it?
The lenders are in a fiduciary capacity to be honest and transparent to the customers, as much as the parents are in fiduciary capacity to their trusted young kids.
Section 11 of FTA 1999: "A person must not, in trade or commerce, engage in conduct that is liable to mislead the public as to the nature, the characteristics, the suitability for their purpose or the quantity of any services".
Compound interest is NOT suitable for working class public, Taxation office or for Government revenue system itself!!
Section 32L of FTA expressly states that the contract CANNOT exclude this part. That is, no contract can claim compliance just because a customer signed the contract (leading the belief that the customer has 'waived' their rights).
Section 32W of FTA defines "what is an unfair term? A term in a consumer contract is to be regarded as unfair if, contrary to the requirements of good faith and in all the circumstances, it causes a significant imbalance in the parties’ rights and obligations arising under the contract to the detriment of the consumer".
Uniform Consumer Credit Code (a Federal Legislation governing the consumer credits, the legislation itself has left out (deliberately or otherwise), (i) if the code talks about simple interest or compound interest (ii) if the default method is simple interest or compound interest (if clear disclosure in consumer contract is missing).
Part IVA of Income Tax Act provides for Criminal penalty for a scheme promoted solely or predominantly for avoiding tax or for tax benefit. 'Interest Only Option' loan, promoted by Banks, satisfies the requirements of this section. The customers may not be aware of Part IVA but banks do and knowingly violate these.
GROSS NON COMPLIANCE with Mandatory Comparison Rate Legislation Act 2003. For interest rate quoted, they should disclose one single interest rate per annum taking into account the total cost of the borrowing (to the borrower).
Please visit Ready Reckoner for this single percentage. Did the lender disclose this to you? (If not, this warrants immediate cancellation of license to lend. That is why in my case against Westpac I demanded cancelling their licence).
Regulation 33F of Consumer Credit Regulations 1995, (page 38 and 39) reads as follows:
"(1) For the purposes of this part, comparison rates are to be
calculated in accordance with this section.
(2) The comparison rate must be calculated as a nominal rate per annum, together with the compounding frequency, in accordance with this section.
(3) The comparison rate is given by the following formula - i = n x r x 100%, where "r" is the solution of the following - Aj/(1 + r) j = (Rj+Cj) / (1 + r)j (some part of this formula, with similar things on both sides of the equation, is unable to be reproduced, but it is called 't' sigma when j = 0)”. ‘r’ in the formula assumes the quoted rate is the simple interest rate per annum.
So (i) there is a government recognition, being aware of compounding interest (ii) government made it mandatory for the banks to take compounding 'frequency' (monthly/ quarterly/half yearly/annually) into account in calculating the nominal rate per annum (iii) but ALL LENDERS have applied the formula in (3) above, but DELIBERATELY left out the explanation of what 'r' stands for in (3) above!!!
