Protecting
Aussies from predatory credit card practices
Credit card providers will be forced
to scrap unfair and predatory practices within the year under reforms
to be introduced by the Turnbull Government.
It is vital that we protect vulnerable Australians from predatory behaviour
which seeks to make a quick buck from people’s misfortune, and compound
their financial hardship.
Before
the end of this calendar year, the Turnbull Government will:
· require
that affordability assessments be based on a consumer’s ability to repay the
credit limit within a reasonable period;
· ban
unsolicited offers of credit limit increases;
· simplify
how interest is calculated; and
· require
online options to cancel cards or to reduce credit limits.
These
measures will deliver the first phase of reforms outlined in the
Government’s response to the Senate Inquiry into the credit card market.
The reforms will substantially reduce the incidence of consumers being
granted excessive credit limits and building up unsustainable debts across
multiple credit cards. It will put an end to the overly complex and unfair
way in which interest is calculated on credit cards.
Collectively, these measures will help prevent the debt cycle that many
Australians find themselves in. Currently, there is around $52 billion of
debt on the 16.7 million credit cards issued in Australia, with the average
balance sitting at $4,730.
The debt-servicing burden falls more heavily on households with low levels
of income, with households in the lowest income category having debt equal
to four per cent of their annual disposable income, compared to 2 per cent
for those in the highest income category.
These measures will help protect vulnerable Australians, and ensure
financial companies do the right thing by their customers.