Banks under pressure over ’embarrassing’ credit card interest rates
The consumer watchdog said Australians deserve an explanation of why banks charge exorbitant interest rates on credit cards.
Consumers are increasingly concerned about credit card rates above 20%. 100, despite historically low loan costs.
ACCC President Rod Sims said The new daily Consumers deserve to know why these rates are so high, despite the RBA’s interest rate standing at 0.1 percent.
“It’s definitely a problem where you have interest rates charged at around 20 percent and of course the cash rate is much closer to 1 percent,” Mr. Sims said.
“There is a very big gap, which the Australians have to explain to them.”
‘Embarrassing’: banker burns credit cards
Banks face increasingly scrutiny of credit card rates ahead of the new ASIC rules coming into effect and calls from advocates for an ACCC investigation.
ANZ CEO Shayne Elliott on Friday defended a aggressive marketing campaign for a 20.24% interest rate card in an appearance before the House Economics Committee.
ANZ is offering an annual fee waiver and an $ 800 gift card bonus on signup, which begs the question whether it is locking customers into high fees before a crackdown on credit products ‘comes into force in October.
New design and distribution requirements will limit how banks can target products by forcing them to determine consumer needs.
Labor MP Andrew Leigh asked Mr Elliot if he was ’embarrassed’ by the card, which lawyers say would violate the new rules.
“Twenty percent takes you into the world of payday lenders and loan sharks, not the world a big, reputable bank should be operating in,” Dr. Leigh said.
But the bank boss denied that ANZ was trying to lock out customers, noting that 50% of customers (on average) typically don’t pay interest.
“There are much higher rates in consumer credit and small business loans that start with a three and a four in front of them,” he said.
“It is [the credit card] used appropriately… it is totally inappropriate to use a credit card for permanent debt. “
Corporate regulator ASIC found in 2018 that consumers with high-interest credit cards in 2016-17 were overrepresented in problematic debt metrics.
ACCC calls for an investigation
Dr Leigh hopes ASIC will consider offerings like ANZ’s 20% credit card as part of the new design and distribution obligations.
“It’s one thing to charge a markup over the spot rate, but quite another to charge over 200 times the spot rate,” he said. TND.
However, ANZ is not the only bank to arouse the ire of consumer advocates.
Even RBA Governor Philip Lowe has expressed frustration with banks over credit card interest rates, which average around 14% in the industry, according to data from Canstar.
Financial Counseling Australia director Fiona Guthrie wants the ACCC to look at how banks determine their card rates, while consumer group CHOICE believes consumers are being “scammed” by the big banks.
Mr Sims said the consumer watchdog is ready and awaiting an investigation into credit card rates, under the ACCC.
“We need to talk to the government about this,” he said.
Treasurer Josh Frydenberg is supposed to remain vigilant on the matter, but has yet to ask ACCC to investigate.
Such an investigation could question how banks set card rates and how the market works, while a government branch would unlock powers to collect additional information that would compel banks to participate in an investigation.
Mr Frydenberg is currently facing pressure from the Victorian government to embark on credit card reform, after State Treasurer Tim Pallas wrote to him earlier this month complaining about the high rates .
Mr Pallas suggested pegging credit card interest rates to the official spot rate – current rules cap credit card rates at 48% (per year).
“We believe that consumers should not be exposed to an unreasonable or unfair burden due to excessive tariffs,” he said.
Mr. Pallas met with Mr. Frydenberg and other state treasurers on Friday.
Lowe: Consumers Must Shop
Dr Lowe also expressed frustration with credit card interest rates, but believes the best way to solve the problem is for consumers to look for a better deal.
“It’s a problem, but the way to solve it is to go shopping,” he said at a parliamentary committee hearing in February.
The calls to action also come after total credit card debt rose in February after early access to the super plan ended.
Credit card debt rose $ 18.4 million, despite the value of purchases and the number of overdue accounts declining in the month, according to data released by the Reserve Bank last week.