The credit card limit reforms have passed the parliament in Australia which bans banks from inviting customers to increase credit card limits
Credit card limit reforms have passed the parliament in Australia which bans banks from inviting customers to increase credit card limits. Now, banks will no longer be able to approach customers offering credit card limit increases through unsolicited invitations. Banks will be banned from approaching customers in any form – in writing, phone or online – even if someone has previously opted to receive them. Under the changes, banks will be forced to provide an online option to customers to cancel cards or reduce credit.
Currently, about $52 billion of debt is spread over 16.7 million Australian credit cards, at an average of $4730 for each card.
Cabinet minister Michaelia Cash told parliament that these reforms will provide vital protection to vulnerable Australians and improve competition in the credit card market.
The crackdown on credit practices is one of the government’s financial sector reforms announced before it relented on holding a royal commission into the sector. Under the new system, banks will be required to assess the suitability of a credit card contract on the consumer’s ability to repay the credit limit.
Although, Labor supported the reforms, it criticised the government for being slow to act in protecting customers. Labor senator Chris Ketter said that this change cannot come soon enough.
The royal commission though, will deliver the real change in practice and culture. Apart from this, banks will no longer be able to charge backdated interest or charge interest on balances which have already been paid.
Now, the banking regulator will have more powers over non-bank lenders. Senator Cash said that more powers for the banking regulator will add to the Australian Prudential Regulation Authority’s “tools on the shelf”. APRA will be able to make rules and directions that will prevent non-bank lenders from acting in ways that will destabilise the country’s economy. Two separate laws were passed in parliament on Wednesday which gave more powers to the APRA in case of a financial crisis in the future.