New credit card legislation a win big win for consumers

CONSUMERS will be left much better off thanks to big changes to credit cards laws that have forced providers to clean up their act.

CREDIT card providers must clean up their act after a raft of new changes passed today that will leave customers much better off.

Under the drastic new reforms passed through federal Parliament, the following changes will result:

— Customers will no longer be able to received unsolicited offers or credit limit increases from providers (effective January 2019).

— The way credit card interest will be calculated will be simplified and means customers will reduce their monthly charges if their debt is not paid off in full (effective January 2019)

Consumers are the big winners under new credit card laws. Picture: iStock.

— Affordability assessments must be done on a consumer’s ability to repay the credit limit within a reasonable time (effective from July)

— Providers must give an online option for customers to close credit card accounts or reduce their limits (effective January 2019.)

A statement issued by Treasurer Scott Morrison read: “this legislation will protect vulnerable Australians from predatory behaviour which seeks to make a quick buck from people’s misfortune, and compound their financial hardship.”

Treasurer Scott Morrison said the credit card changes are a big win for consumers.

One of the biggest changes is how credit card interest is calculated.

Previously if a customer owed $1000 on their card at the end of the month, if they only pay off $500, under the changes they will only be charged interest on the remaining $500 owing, not on the full amount accrued in that month.

Consumer group Choice’s chief executive officer Alan Kirkland said this is a huge win for customers.

“For years, banks have been forcing consumers to jump through hoops when they try to cut ties with debt,’’ he said.

“Meanwhile, banks are offering online credit card approval under 60 seconds.

“Too often banks have loaded up consumers with excessive credit limits without properly considering a person’s ability to repay.”

The Australian Bankers’ Association’s chief executive officer Anna Bligh said “it’s critical that consumers are well protected.”

Australian Bankers' Association CEO Anna Bligh said it is critical credit card customers are protected.

“Australian banks have voluntarily included a range of new credit card protections in the new Code of Banking Practice, including ending unsolicited offers of credit limit increases, better assessing what customers can repay and cancelling a card online,’’ she said.

“Having these protections enshrined in law is a welcome improvement for customers.”

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Originally published as New credit card legislation a win big win for consumers