Credit card reforms fast-tracked

The Government’s Competitive and Sustainable Banking System Package contains a proposal to fast-track its election commitments with respect to credit cards.

In its Fairer, Simpler Banking policy the Government committed to credit card reforms which included proposals that:

  • consumers are not charged over-limit fees unless they specifically agree that their account can go over the limit,
  • credit card providers must allocate repayments to higher interest debts first and
  • interest charges are applied consistently under an industry-agreed standard, including when interest starts to accrue and on what balances.

Additionally the announced reforms will include:

  • banning unsolicited credit limit extension offers unless pre-agreed to by the consumer
  • making sure lenders give consumers more say over nominating their own credit limit
  • making it mandatory for credit card application forms to include a clear summary of key account features
  • requiring lenders to inform consumers about the implications of only paying minimum repayment amounts on their statements

These changes will be separate from the Stage 2 credit reform process discussed in the Green Paper.

It is proposed that exposure draft credit card reform legislation will be released in January 2011 with the relevant legislative amendments to be introduced in the first sitting of Parliament in 2011.

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