The Australian Bankers Association has strongly criticised Labor’s “Fairer, Simpler Banking” policy on credit cards unveiled by Julia Gillard, Wayne Swan and Chris Bowen.
Labor’s “Fairer, Simpler Banking” policy aims to increase the transparency of credit cards and the associated fees and charges imposed by banks, so as to help consumers avoid falling into a “credit card debt trap”.
Labor’s credit card policy has three main elements, fees and charges reforms, credit card limit reforms, and credit card application and statement reforms.
The Australian Bankers’ Association (ABA) has slammed Labor’s credit card policy and argued that the industry has successfully self regulated in the past, delivering better value for credit card holders now than banks did previously.
The ABA reacted particularly strongly to the possibility of Labor’s policy regulation banning unsolicited credit card limit offers to card holders.
Steven Münchenberg, Chief Executive of the ABA believes credit card default is related to unemployment, illness and family breakdown, not bank marketing.
“Credit card limit offers are just a form of advertising to customers whom banks believe might want greater flexibility with their existing credit limit.”Mr Münchenberg said.
A summary of Labor’s proposed credit card reforms under their “Fairer, Simpler Banking” policy:
• Over-limit fees cannot be charged unless consumers specifically agree that their account can go over the limit.
• Credit card providers will have to allocate repayments to higher interest debts first.
• Interest charges will be applied consistently under an industry-agreed standard, including when interest starts to accrue and on what balances.
• Unsolicited credit limit extension offers will not be able to be made unless the consumer has agreed to the service.
• Consumers will have more say in setting their own credit limits, subject to responsible lending obligations.
• Credit card application forms will have to include a clear summary of key account features.
• Credit card providers will have to inform consumers about the implications of only paying minimum repayment amounts on their statements.
