Senate inquiry implores government to enforce minimum credit card repayments
The Senate inquiry on the credit card industry has called on the government to enforce minimum repayments for credit card users in a final report released yesterday.
While it wasn’t specified what the minimum should be, the Senate expressed an urgent need for the government to act. The committee in the report noted it was troubled by the evidence of “individuals and families struggling under the weight of high-interest credit card debt”.
The recommendation of minimum card repayments was one of 11 recommendations calling on the banks and government to act in order to reduce the number of credit card users who spiral into debt.
In the report the committee used the UK’s 2011 reforms as an example of good practice, where all cards since then have had minimum repayments of at least the total of any interest, fees and and charges, plus 1% of the outstanding balance.
Credit card provider, ME said this morning it supported the inquiry’s recommendations, especially recommendation 8.
ME’s Head of Deposits and Transactional Banking, Nic Emery said they were pleased about recommendation 8, which said credit card providers should make “reasonable attempts” to let cardholders know when their balance transfer period is about to expire and the outstanding balance has not been paid.
“This will help customers avoid the higher rates that kick in after the interest-free period expires,” Emery said.
According to ME’s research 73% of card holders don’t know their current rate and 40% don’t know if their card has an annual fee.
Other recommendations from the inquiry included clearer advertising of interest rates on credit cards, making it easier to close credit card accounts online, and for the government to implement financial literacy programs.
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