Credit card providers will be forced to scrap unfair and predatory practises – after the Turnbull Government passed legislation through the parliament today.
These much needed reforms that the Turnbull Government has championed include:
- requiring affordability assessments be based on a consumer's ability to repay the credit limit within a reasonable period (from January 2019);
- banning unsolicited offers of credit limit increases (from July 2018);
- simplifying how credit card interest is calculated; and requiring credit card providers to have online options to cancel cards or to reduce credit limits (from January 2019).
This legislation will protect vulnerable Australians from predatory behaviour which seeks to make a quick buck from people's misfortune, and compound their financial hardship. This is the first phase of reforms outlined in the Government's response to the Senate Inquiry into the credit card market, which seeks to put more power in the hands of consumers.
The Bill will also materially boost competition in the banking sector by allowing small lenders to call themselves banks; a significant change that will entice new lenders and challenger banks to enter the market. This will provide greater choice for Australians and put downward pressure on the cost of banking products and loans.
In lifting the ban on the use of the word 'bank', any lender with an ADI licence will now be able to market themselves as a bank, whether they have bricks and mortar branches or operate exclusively online. Off the bat, this reform paves the way for more than 60 current Australian lenders and credit unions to call themselves banks.
The Bill – the Treasury Laws Amendment (Banking Measures No. 1) 2017 – also strengthens financial stability by providing the Australian Prudential Regulation Authority (APRA) a new reserve power over the lending activities of non-banks. It modernises APRA's legislative framework by making clear APRA's roles and responsibilities under the Banking Act 1959.
This Bill accompanies the Turnbull Government's Banking Executive Accountability Regime, which brings greater accountability to our banks by introducing tough new rules for banks and their executives, and the Crisis Management Bill, which strengthens APRA's crisis management powers.
Together, this suite of legislation will help to ensure that Australia's financial system is competitive, accountable and unquestionably strong.