9 Australian lenders commit to improve credit card practices
The Big Four, Citi and Amex are just some of the credit card issuers highlighted in ASIC's latest report on responsible lending.
The Australian Securities and Investment Commission (ASIC) has released an updated report into credit card lending today. The report shines a light on nine of the biggest credit card issuers in Australia and their varying initiatives to enforce more responsible credit practices. This follows an ASIC report that was released in July 2018 that revealed that one in six Australian consumers is struggling with their credit card debt.
The July report also stipulated that ASIC expects credit providers to take "proactive steps" to address problematic credit card debt and products that aren't suited to customers, minimise the credit increases for consumers who regularly go over their credit limit and allocate repayments to balances collecting the highest interest first.
Following the release of the report, ASIC reached out to 10 of the largest Australian credit providers and sought their commitment to enforce these practices. These credit issuers include American Express, ANZ, Bendigo and Adelaide Bank, Citigroup, CBA, HSBC, Latitude, Macquarie, NAB and Westpac. The proposed commitments and improved lending initiatives are outlined below.
Preventing problematic debt
Out of the organisations contacted, nine committed to take steps to help consumers with problematic credit card debt (all except Bendigo and Adelaide bank). The exact initiatives vary between providers, but include the providers contacting customers who have or are at the risk of problematic debt. It also includes providing customers with structured payment arrangements and more education around healthy credit card practices.
Macquarie is also enforcing further restrictions on high-interest transactions such as cash advances, gambling purchases and over-limit amounts in an attempt to reduce the risk of problematic debt.
Credit limits and balance transfers
Nine credit issuers also pledged to lower the amount that customers can exceed their credit limit by. All included issuers (except American Express) will restrict the maximum amount by which a consumer can exceed their credit limit to 10% or less.
Four issuers (ANZ, CBA, HSBC and Macquarie) also pledged to take fairer approaches to balance transfers, including allowing interest-free periods on new purchases and being more transparent about cancelling old credit cards.
ASIC will be monitoring these credit issuers over the next two years to ensure that these practices are enforced.
"We will be monitoring lenders over the next two years to make sure they have taken action to address our concerns, and to ensure that consumer outcomes are improving in the credit card market," said ASIC commissioner Sean Hughes.
In the spirit of a move towards more responsible credit card lending, this report is also released just a few weeks before the next round of credit card reforms roll out on 1 January 2019.
As of the new year, credit card issuers must assess applications based on the individual's ability to repay the entire credit limit within a three-year period. Credit card issuers also must give customers the option to cancel their accounts or reduce their credit limits online. Retroactive interest charges will also be banned from the beginning of January. The first of these reforms rolled out in July 2018 with the banning of credit limit increase invitations.
You can learn more about these changes in our guide to how the new credit card reforms will impact you.