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GOVERNMENT TO LEGISLATE NEW CREDIT CARD RULES

Friday, 21 July 2017

Treasurer Scott Morrison says credit card providers will be forced to scrap unfair and predatory practices within the year under reforms to be introduced by the Federal 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,” Mr Morrison said.

“Before the end of this calendar year, the 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.”

The new rules are in addition to changes in credit card rules which commenced on 1 July 2017.

Fairfax Media reported that under the new rules which commenced on 1 July 2017 “Consumers can expect to receive fewer perks for using bank-issued American Express cards from this weekend, as rules that are set to shake up the credit card market come into force.

“Payment regulations starting in the new financial year mean banks will make much less revenue from American Express "companion cards" to Visa and Mastercards, and lenders have responded by slashing the value of reward schemes for these cards.

“Commonwealth Bank, Westpac, and National Australia Bank have all announced cuts in the value of their rewards schemes for companion cards in recent months, to take effect from July. ANZ Bank is dumping its Amex companion card altogether.”

Referring to the next round of credit card changes the Treasurer said, “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 4 per cent of their annual disposable income, compared to 2 per cent for those in the highest income category,” the Treasurer said.

 

Click below to view source

Treasurer's media release: Protecting Aussies from predatory credit card practices

Fairfax Media: Fewer perks, but more competition from credit card rule change

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