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2007
Banking reform plan takes on credit cards
The Age
Monday March 21, 2011
THE Gillard government's banking reform plans have continued to focus on credit cards, as part of its previous proposals to make mortgages more transparent.They will force banks to provide much more detail about credit card repayment, including setting out the interest to be repaid and how long it would take for a card holder to repay in minimum monthly payments.The proposals come hot on the heels of a range of other planned credit card rules, including banning banks from issuing over-the-limit fees and preventing cardholders from exceeding credit limits by more than 10 per cent.The changes, which met fierce industry resistance, threaten to shut off a lucrative earnings stream for many banks, with over-the-limit fees running into hundreds of millions of dollars a year.The draft disclosure documents released by Treasury will require banks to provide a disclosure document before signing up consumers for credit cards. As well as setting out interest rates and additional fees, the disclosure warns cardholders about how long it would take to pay down the credit card in minimum monthly repayments if the limit has been reached.The reforms will also increase disclosure around mortgages, forcing banks to spell out the total loan borrowers repay during the life of a mortgage as well as yearly payments and fees. For the first time, banks would have to break down total repayments measured against each dollar borrowed. That is, a $300,000 loan at standard interest rates will translate to repayments of $2.48 for every $1 borrowed during the life of the mortgage.One proposal expected to meet resistance from banks forces lenders to spell out the amount by which loan repayments will rise if interest rates were to rise by one percentage point.Banks will have a week to respond. No decision has been made on whether the changes would be made, Treasury said in a statement.
© 2011 The Age
