Credit card limit increase invitations banned

Posted: 1 July 2018 10:00 am
News

The first of four planned credit card reforms is designed to protect Australian cardholders from predatory lending.

The first of the four government credit card reforms is rolling out today. From 1 July 2018, credit card issuers are prohibited from inviting customers to increase their credit limit. This includes all forms of communication (whether it’s email, via phone, in person or in letter form), even if the customer has consented to receive such invitations in the past.

Previously, you needed to tick a box during your application or contact your bank to opt out of receiving invitations to increase your credit limit. But now, banks can’t contact you via any form of communication to invite you to extend your credit limit.

This reform amends the National Consumer Credit Protection Act 2009 and is designed to protect cardholders from predatory lending through the temptation to increase their credit limit. From today onwards, customers will need to contact their card provider directly to request a credit limit increase. The bank will then assess their current financial situation to determine whether they are eligible for an increase. From 1 January 2019, credit issuers will need to assess these contracts based on the customer’s ability to pay it back within a reasonable period set by ASIC.

If you want to reduce your current credit limit, you can also do this over the phone with your card issuer. From 1 January 2019, consumers will have the option to reduce their credit card limits and cancel their cards online. If you currently try to cancel your card or reduce your credit limit, you may find the customer service representative tries to convince you not to do so. From 1 January next year, the credit provider will be banned from doing this and will be required to assist the customer make the reasonable steps to complete their request.

This isn’t the first time we’ve seen changes to the way credit limit increases work in Australia. In 2012, credit card reforms prevented credit card providers from offering customers credit limit increases unless they provided consent. However, this didn’t stop card issuers from offering credit limit increases over the phone or electronically, regardless of whether or not you’ve opted to receive these invitations.

Then in 2017, Treasurer Scott Morrison argued that this ban should apply to other forms of communication from banks and credit issuers. Morrison argued that invitations to increase your credit limit could be very tempting if you’re struggling to manage your finances and could lead to potential irresponsible lending. Instead, credit card customers will now need to make a conscious decision based on their financial needs and undergo stricter assessment before receiving a credit limit increase.

From today forward, if you do require more credit, you can check out our guide to increasing your credit card limit for the steps you'll need to take. This guide also covers the factors you may want to consider before deciding whether or not you should apply for a credit increase.
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