3rd Jan 2019
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Key lenders promise to improve credit card practices
Author: Janelle Ward
credit card debt

Credit card providers have vowed to improve their practices in the wake of a damning report by the Australian Securities and Investments Commission (ASIC) that found more than one in six consumers were struggling with debt.

The report also found that in June 2017, 930,000 had persistent debt and almost 550,000 people were behind with repayments.

It calculated that more than $621 million in interest could have been saved in 2016–17 if consumers had switched to a lower interest card.

It also discovered that 63 per cent of consumers did not cancel a card after a balance transfer and some actually increased their debt post transfer.

ASIC said that it expects credit providers to:

  • take proactive steps to address problematic credit card debt and products that do not suit consumers
  • minimise the extra credit provided to consumers who regularly exceed their credit limit
  • allocate repayments for all credit cards in the more favourable way required for cards entered into after July 2012.

ASIC had talks with the 10 largest credit providers – American Express, ANZ, Bendigo and Adelaide Bank, Citigroup, CBA, HSBC, Latitude, Macquarie, NAB and Westpac – and sought their commitment to change.

The result was that:

  • nine large credit providers committed to taking proactive steps to help consumers with problematic credit card debt
  • four committed to fairer approaches for balance transfers, and
  • nine committed to lower the amount by which consumers can exceed their credit limit.

ASIC said many credit providers were also trialling measures — such as tailored communications and/or structured payment arrangements — to help consumers struggling with credit card debt. Others were taking a fairer approach to balance transfers, such as by allowing interest-free periods on new purchases and improved disclosure details in relation to cancelling old cards.

ASIC has prescribed a three-year period for responsible credit card lending, meaning providers must not provide a card with a credit limit that the consumer could not repay within three years. This reform starts on 1 January.

“ASIC expects that all credit card lenders will address the issues raised in our review,” said ASIC commissioner Sean Hughes.

“We will be monitoring lenders over the next two years to make sure they have taken action to address our concerns, and to ensure that consumer outcomes are improving in the credit card market.”

ASIC said it would not hesitate to use its enforcement powers to bring about needed changes.

ASIC's MoneySmart website has information for consumers about choosing and using credit cards.

Have you had issues with credit card debt? Do you welcome the improvements promised by the big lenders? Have the changes gone far enough?

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    COMMENTS

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    Lothario
    18th Dec 2018
    4:27pm
    ffs - now banks have to baby sit irresponsible spenders ???

    next labor will want to tax the financially responsible to pay the bills of those who spend everything and go into debt

    oh wait - that's already happening with Shorten's franking credit, negative gearing energy and newstart policies
    maelcolium
    19th Dec 2018
    11:17am
    Oh dear. It amuses me how you draw politics into every issue - your life must be extremely dull.
    Oh, by the way, the article is about ASIC action on predatory practices with credit card administration, in case you didn't notice.
    Old Geezer
    19th Dec 2018
    11:21am
    I agree Lothario responsibility is fleeced not rewarded in this country.
    Old Geezer
    19th Dec 2018
    11:24am
    maelcolium it's not about the enders at all. It about people not being responsible with lending. So do we put everyone on a welfare type card and monitor their spending and give them a good zap if they are not responsible.
    Sundays
    19th Dec 2018
    1:34pm
    I don’t think sending 18 year olds who have had school banking with commonwealth bank a credit card is at all responsible. Neither is St George offering to increase my credit card limit (probably because it’s always paid off), or ANZ offering us a $30k limit. They don’t know me personally, and I could be in huge debt already
    Old Geezer
    19th Dec 2018
    11:22am
    Nothing will change people will still borrow more from somewhere else instead at much higher interest.
    1984
    19th Dec 2018
    12:28pm
    It's the way a lot of families operate today. Buy today, put on card, no problem. Until it's time to pay & they get their monthly statement.
    My ex partner (notice EX) used to get very excited when her card credit limit was increased because she was maxed out. I used to tell her it's not your money & they want it back plus. Fell on deaf ears as she walked out the door with card in hand to find the sales.
    People have to be responsible for their debt & if they have trouble handling the debt then seek advise. Plenty of free professional help available.
    KSS
    19th Dec 2018
    1:00pm
    But 1984, it is sooo much easier to blame the big bad banks for 'increasing the credit limit' than it is to accept personal responsibility for one's own profligacy.

    How much higher will the debt be two weeks from now (Boxing Day sales anyone?)?


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