Does Shearer want the Government to set bank interest rates?

August 9th, 2015 at 7:00 am by David Farrar

Stuff reports:

With profits expected to go even higher Shearer said the government should be “demanding a better deal for New Zealand households”.

“An example of where Kiws are paying through the nose is on credit card interest. We still pay around the same interest rate on them – more than 17 per cent – as we did eight years ago, despite bank borrowing rates plummeting five points to 3 per cent in that time.”

What does Shearer want the Government to do? Pass a law so the Cabinet sets credit card interest rates like Muldoon used to almost do?

Credit card interest rates vary from 13.6% to 24.95%. I prefer competition to government dictate.

Shearer said Kiwis were a “soft target and a nice little earner” for Australian banking giants, who were using “unfair” tactics on New Zealanders.

What is unfair exactly?

With Australian banks making a profit of about $1000 off every adult and child in the country it was time for the Reserve Bank to put a microscope on the issue, he said.

An average can be misleading. If like me you have a large mortgage, then your bank makes a large profit out of you. If you don’t have a mortgage they make a small profit. And on my credit card they make nothing from me directly, as I pay my account off every month.

Credit card limits

June 2nd, 2014 at 12:00 pm by David Farrar

Stuff reports:

The total amount of credit card limits has topped $20 billion for the first time, and that does not surprise one retiree from West Auckland whose bank has offered to lift his limit by $19,500.

Gary Osborne, a retiree who owns two rental properties, didn’t ask for the increase offered in a letter by his bank, ANZ.

His limit hasn’t been automatically lifted, but a coupon was attached to the letter which he had only to send back for his limit to rise from $26,500 to $46,000. The letter said that as a valued customer, the new, higher limit had been “pre-approved”.

Osborne won’t be accepting the higher limit, calling it a “ridiculous” sum, and saying he has not need for it.

So he should say no.

Banks today won’t increase your credit card limit without your authorisation. This wasn’t always the case.

When I was at university and exceeded my credit card limit, the bank would decline further charges until it was paid off.

Once I was working, then whenever I exceeded my credit card limit the the bank would send me a letter saying you obviously need a higher limit and raised it.

They never asked me if I wanted a higher limit and over the years it went from $1,500 to $15,000.

A few years ago they agreed to stop this, and now just offer you a higher limit – which is fine.

Of course the banks want people to borrow more. But they also don’t want people unable to pay their debts off, so they do profile who to offer higher limits to. Again, you can always say no.

You can also do what I do, and highly recommend. Set up a direct debit to pay off your credit cards on the due date. That way you get up to 55 days free credit and never pay a cent in interest. Of course you need to have enough funds to be able to pay your bills off in full – but if you can’t – then might be better to get a personal loan than pay credit card interest rates.

Beyond the hyperbole

February 6th, 2014 at 7:00 am by David Farrar

Stuff reported:

The Government wants to override privacy laws to supply the US Government with private details about Americans living in New Zealand.

As part of a global tax-dodging crackdown, the US is forcing banks and other financial institutions to hand over the private financial details of US “persons” and companies based overseas.

From July this year, Kiwi banks and insurers will be required to provide US tax authorities with American customers’ contact details, bank account numbers and transaction history.

The move is already deeply unpopular among banks and expat Americans overseas, some of whom have accused the US of “fiscal imperialism”.

In New Zealand, it has left banks stuck between defying the US and breaking domestic privacy laws that protect all New Zealand residents, including Americans.

But now the Government is stepping in with plans to “override” privacy laws to help banks meet the US demands and reduce costs.

And who is complaining about this:

Council of Trade Unions economist Bill Rosenberg said the US’s tax reporting requirements were another example of US interests dictating New Zealand law.

“There is clearly a breach of privacy here.”

It’s amusing to have the CTU defend the rights of US tax evaders. They are the ones that are affected by this. The next time the CTU goes on about people not paying enough tax, we should recall their support for US citizens to be able to evade tax through NZ banks.

A banking source e-mails:

The first thing to point out is that the only people with something to worry about with FATCA are American tax evaders…not the people you’d normally think the CTU would worry about. The actual number of people affected in NZ will be very, very small. If you’re a New Zealander you’ve got nothing to worry about, if you’re an American and you’ve met you tax obligations you’ve got nothing to worry about.

Secondly, it’s not as though the NZ Govt is an outlier in taking these steps. In fact as this site shows virtually every developed nation is in the process of taking similar steps. The brutal reality is that if NZ does not meet our FATCA obligations the U.S will put us on black list and whack a 30% odd withholding tax on any US transactions by NZ financial institutions – this will cost all NZers. This is why NZ and pretty much every other developed country is meeting its FATCA obligations.

In fact the Government has actively pushed back to protect NZers privacy as much as possible – the Bill is drafted so as to ensure that only bare minimum of data required to meet our FATCA obligations is passed over.

End story is that no one really wants to be doing this but just as in Australia, the UK, Norway, Spain, South Africa, Brazil, Switzerland, Thailand, Russia etc etc we have no choice. 

The CTU standing up for the rights of Americans to evade tax. What champions they are.

A smart move

December 1st, 2012 at 10:00 am by David Farrar

Richard Meadows at Stuff reports:

New Zealand banks are wading into the Novopay disaster to offer interest-free overdrafts to teachers and school staff running short on cash.

Problems with the Education Ministry’s new payroll system have led to thousands of teachers paid incorrectly or not at all.

Some have reported being unable to meet mortgage payments or falling behind on hire purchase or credit card debt as a result of the cashflow squeeze.

The banks participating in the interest-free overdraft offer are ANZ New Zealand, ASB Bank, Bank of New Zealand, The Co-operative Bank, Kiwibank, SBS Bank, TSB Bank, and Westpac New Zealand.

They are offering six weeks of interest-free respite –until January 15 – up to the equivalent of any missed payroll payments.

Affected teachers and school staff have to provide evidence to their bank, for example a letter from their school, detailing how much they are owed.

Their bank will then arrange an overdraft facility on the account to which their salary is paid, or to another account by arrangement.

New Zealand Bankers’ Association chief executive Kirk Hope said the banks had offered their support to help tide people over the holiday period.

“I encourage affected school staff to get in touch with their bank so they know they’re covered and can have some peace of mind over the holidays,” he said.

A very smart PR move from the banks.

As I understand it any teacher underpaid can also get reimbursed within 24 hours by their school directly – and the school then gets reimbursement from the Ministry of Education.

However relieving teachers who have no main school, are less able to do this easily, so the move by the banks should be of assistance to them especially.


May 18th, 2012 at 10:57 am by David Farrar

Stuff reports:

Slipped a cheque in the mail lately? Or left one on the back porch for the lawnmower man?

The stereotype of a cheque user is elderly and a little distrustful of the digital world.

But a study on how best to nurse cheques through their last few, terminal years has found that is not necessarily true.

Bank-owned payments regulator Payments NZ is working on a project to help its bank owners through the phasing-out process.

The results will not be public until later this year, but early hints confound some of the more common stereotypes.

The vast majority – about 90 per cent – of cheque users also use electronic banking, says Payments NZ chief executive Steve Nichols.

Only a small proportion is wholly reliant on cheques.

Most users write a mere five to seven cheques a year, suggesting they do most of their transacting by other means.

I do not think I have done a cheque for some years. I will even ring people and ask for bank account numbers than do a cheque. Thi is partly because I rarely go to the post office also, so dislike having to post things.

But more to the point Internet Banking means your bank records show who you paid and why. Cheques do not. Maybe a feature for banks to consider is the ability to electronically edit or tag transaction lines, so if you do write a cheque you can have recorded in your bank records who it was to, and why.

The left’s banking inquiry

July 22nd, 2009 at 11:00 am by David Farrar

Labour and the Greens have set up their own inquisition inquiry into banks. The Herald reports:

An expert in banking has rubbished a planned inquiry and says banks are being treated as scapegoats.

Massey University Centre for Banking Studies director David Tripe said the inquiry should not be taken seriously.

Little danger of that.

What I find amusing is the opening statement on the inquiry site:

Many New Zealanders are concerned about the high level of interest rates

The floating mortgage rate averaged 6.44% in June 2009. In June 2008 when Labour were in office it was 10.9%. So they were not concerned about 10.9% but are concerned about 6.4%?

That reduction means a $250,000 mortgage homeowner is paying $11,250 a year less interest or has an extra $215 a week in the hand.

IRD vs the banks

June 15th, 2009 at 8:29 am by David Farrar

The Dom Post reports:

The Inland Revenue Department is asking the High Court to rewrite tax law in a $641 million tax avoidance case between it and the BNZ, the bank says. …


BNZ is the first of the four main trading banks to challenge Inland Revenue’s claims of tax avoidance by using so-called structured financial transactions, involving foreign financial institutions between 1998 and 2002. The banks have been assessed to owe about $2 billion in unpaid taxes and interest. Inland Revenue claims the transactions generated tax losses through fees and hedging costs which the bank then used to offset other taxable income.

But BNZ’s lawyer Alan Galbraith, QC, said in his closing submissions to the High Court at Wellington that Inland Revenue’s case was “fundamentally misconceived” in the legal interpretation and tests, and the commercial and economic reality of the deals. Inland Revenue had also incorrectly inferred that, if Parliament had mistakenly failed to bar the use of structured financial transactions in tax legislation, the court could remedy the situation.

There is a lot at risk with these cases. I understand from informed sources close to one of the banks, that they have offered to settle the case for around $500 million. Informally it seems this was acceptable to Ministers, but that Crown Law was strongly against any settlement.

I understand that until the cases are resolved, there is considerable uncertainity over funding arrangements for the banks, and this is partly why interest rates are not dropping more.

I don’t know the strength of the Government’s case, but I imagine questions will be asked if they lose the case, after declining half a billion dollar settlement. And if the banks do lose, I suspect it will end up in the Supreme Court in a few years. And the problem is that until we get a final Supreme Court ruling, uncertainity may remain.

UPDATE: An informed source tells me that the Government is not facing much risk due to the Supreme Court decision in Trinity. They agree it will go to the Supreme Court but are very confident that the cost of doing so will be a small fraction of the eventual judgement.  Also that IRD generally can not agree to part settlements – only to reduce or waive penalties.