The appointment of Steve Sargent, CEO of GE Australia and New Zealand, to the Financial Sector Advisory Council, will raise eyebrows within consumer and financial advisory circles.
Why has Wayne Swan appointed someone whose company is at the centre of Australia’s consumer credit problems to one of his most important financial advisory groups?
It also raises conflict of interest questions given GE Money’s dominant position in offering non-bank finance to Australian consumers, especially those in the poorer parts of the community.
GE Money, GE Australia’s main business, finances the credit cards for most Australian retailers, including Harvey Norman and the Coles group (but not David Jones). These include the now infamous “interest free” loans that Harvey Norman and others use to attract business. The interest rates on these cards run from 21% to more than 28%, which is bordering on usury.
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GE also owns the Wizard home loan group.
Four Corners recent report on debt had GE Money in a starring role. This is part of the transcript:
(Reporter) STEPHEN LONG: Behind nearly all the store cards, providing the credit is one company: GE. It began life producing the world’s first electric light bulbs in the 1900s; now GE is a global financial colossus and it dominates the market for store-branded credit cards worldwide.
GARRY ROTHMAN, UNITING CARE, BROADMEADOWS: No repayments for four years – GE products. Credit cards that are GE products, store cards that are GE products. And so people may come to us and say that they have four or five debts or credit responsibilities, and they’re surprised to find out that they’re all with one company, they’re all with GE.
CAROLYN BOND, CONSUMER ACTION LAW CENTRE: One of GE’s credit cards has a 28 per cent interest rate and most people get into that card by starting off with interest free. So it’s a real trap. I mean who’s going to be paying, having an outstanding credit card balance over a long period of time at 28 per cent if they can actually afford to pay it back. So I think that product itself is really, it really exploits people who are in financial difficulty already.
So is Sargent on the advisory council for his contribution on financial matters or his knowledge of the dodgy end of the business? And, what will he and Swan do if the council looks at consumer debt and the problems created by offers like those from GE Money?