Bank customers to get interest relief on credit cards ahead of royal commission
MAJOR banks will no longer be able to hassle credit card customers with unsolicited offers to increase their credit limit and customers will only pay interest on what they owe after interest-free periods expire.
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MAJOR banks will no longer be able to hassle credit card customers with unsolicited offers to increase their credit limit as part of a sweeping crackdown.
An agreement lodged with the nation’s corporate regulator also means customers would only pay interest on what they owe after interest-free periods expire — not the full amount of the purchase as they currently do — saving some borrowers thousands.
The deal largely pre-empts reforms planned by the Turnbull Government earlier this year, which have yet to pass Parliament.
Those changes, announced by Treasurer Scott Morrison in August, crack down on predatory behaviour by the banks in pushing credit cards on families that can’t afford them. They were announced after concerns about the impact of high interest rate cards and zero per cent balance transfers, particularly on vulnerable families.
The new agreement also comes as the royal commission into the banks is preparing to get under way.
Australian Bankers Association chief executive Anna Bligh said the changes were a way of “making changes to processes, providing customers with more info and introducing higher standards for how banks serve their customers”.
“This new set of rules and behaviours will go a long way in addressing the expectations that Australians have of their banks,” she said. “Banks most certainly do not underestimate the challenge ahead of them and will continue to make the necessary changes and improvements that their customers expect.”
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A spokesman for Mr Morrison told The Daily Telegraph the government would also require “affordability measures (and) providers to simplify how interest is calculated”.
“We support the banks getting on board with the government’s crackdown on misconduct by credit card providers,” she said.
The most significant change is to a practice which currently means customers are charged interest on the entire purchase made during an interest-free period, not just what is left owing, until it is fully paid off.
The proposed agreement would also force banks to create a simple way for customers to cancel their credit card online, and to tell them whenever it is reporting a default to credit agencies. Banks will also no longer send their customers offers to raise their credit limits without prompting, after concerns some were racking up enormous debts they wouldn’t have been able to had their limits not been increased.
A spokesman for the Australian Securities and Investments Commission said the regulator would “consider the code of practices lodged yesterday afternoon, and respond in the first three months of next year”.