The Government must take meaningful action on the lifelong debt sentences wreaking havoc on many Australians by credit cards.
Consumer Action Law Centre commends the recommendation of the Senate inquiry report into credit cards for recommending tougher responsible lending laws for credit cards.
Consumer Action strongly supports the recommendation to improve credit card affordability assessments, as its financial counselling service receives calls from many Australians struggling to pay their credit card bills in the lead up to Christmas.
“The inquiry has raised issues that need considered and bipartisan support. The Government needs to take these issues seriously as they impact some of the most vulnerable in our community,” says Consumer Action CEO Gerard Brody.
“Getting a credit card shouldn’t be a lifelong debt sentence. The problemc is that people are being assessed for credit cards on their ability to meet the minimum monthly payment. This means they may be stuck with high interest debt for decades. We say you should be assessed on whether you can repay the full credit limit within three years,” says Brody.
The Centre also supported recommendations aimed at improving competition in the credit card market.
“The regulatory system should encourage Australians to shop around, and switch credit cards when they see a product that better suits their needs. At the moment, you can sign up for credit cards online but not cancel them. You shouldn’t have to deal with pushy sales staff every time you want to close a credit card account. We agree with the Inquiry that credit card providers should offer online ‘click-and-close’ facilities,” says Mr Brody.
While supporting many of the Inquiry’s recommendations, the Centre says that consumers have been let down by the Inquiry’s response to balance transfer offers.
“Balance transfer offers are a debt trap. They offer teaser introductory rates, but revert to very high rates of interest and can involve hidden fees and tricks. These cards are clearly designed to profit from those that are unable to repay within the introductory period.” says Brody.
“We need to tackle this problem head on, but instead the Inquiry has recommended that we leave it to the banks to deal with. We want to see balance transfer offers made fairer for consumers, and the Inquiry’s recommendation won’t achieve this. These offers should be designed to help Australians pay off their debt, not sentence them to a longer debt sentence.”
Consumer Action Law Centre’s submission to the Senate inquiry is available at: https://consumeraction.org.au/matters-relating-to-credit-card-interest-rates-senate-standing-committees-on-economics/