Senate Credit Card Report: The Recommendations

On 24 June 2015, the Senate referred an inquiry into matters relating to credit card interest rates to the Senate Economics References Committee for inquiry. The Committee has now released its report.

After six months and 37 submissions, the Senate Economics References Committee has handed down its report into interest rates and informed choice in the Australian credit card market.

Chaired by Senator Sam Dastyari, the report has made 11 recommendations to overhaul the credit card market and practices in Australia.

What are the Recommendations for the Credit Card Industry?

Recommendation 1: Marketing Disclosure on Key Features

The committee recommends that credit card advertising and marketing material should disclose clearly the cost of a credit card for a consumer, including the card’s headline interest rate and ongoing annual fee.

Recommendation 2: Reminders About Rates & Fees

The committee recommends that credit card monthly statements should include prominent reminders about a credit card’s headline interest rate and ongoing annual fee.

Recommendation 3: Creation of a System to Help Customers

The committee recommends that the government work with key stakeholders to develop a system that informs consumers about their own credit card usage and associated costs. Initially, historic usage and cost data could be provided in monthly statements. Over time, it would be desirable to provide customer-specific, online, machine readable records that would allow credit card users to compare credit cards using online comparison engines.

Recommendation 4: Credit Card Switching & Innovations

The government should undertake a review into technical and systems innovations that might help facilitate switching in the credit card market, and as part of this review consider the feasibility of account number portability for credit card accounts.

Recommendation 5: Closing a Credit Card Online

The committee recommends that card providers should be required to provide consumers with the ability to close a credit card through an online process (‘click-and-close’).

Recommendation 6: Changes to Serviceability

The committee recommends that the responsible lending obligations, as they apply to credit card lending, be amended so that serviceability is assessed on the basis of the borrower’s ability to pay off their debt over a reasonable period. The government should consult with industry, consumer groups and other interested stakeholders to determine what constitutes a ‘reasonable period’ in this regard.

Recommendation 7: Minimum Repayments Made Compulsory

The committee recommends that the government consider introducing a credit card minimum repayment requirement and alternative means of reducing the use of credit cards as long-term debt facilities.

Recommendation 8: Contacting Customers When Periods Change

The committee recommends that credit card providers should be required to make reasonable attempts to contact a cardholder when a balance transfer period is about to expire and the outstanding balance has not been repaid. In doing so, the provider should be required to initiate a discussion about the suitability of the customer’s current credit card and, where appropriate, provide advice on alternative products.

Recommendation 9: Financial Literacy

The government should consider expanding financial literacy programs such as the Australian Securities and Investments Commission’s MoneySmart Schools Program.

Recommendation 10: Contacting Customers Who Continue to Make Minimum Payments

The committee recommends that credit card providers should be required to make reasonable attempts to contact a cardholder in cases where a cardholder has only made the minimum payment for 12 consecutive months on interest bearing balances, and thereby initiate a discussion about product suitability and alternative lending products.

Recommendation 11: Inquiry into Payment Regulations

The committee recommends that the government consider a Productivity Commission inquiry into the value and competitive neutrality of payments regulations, with a particular focus on interchange fees.

It remains to be seen how the government will choose to respond to the recommendations.

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