Edition 39, October 2006

Ministers call for options to deal with credit card debt

Australia's consumer debt level is a red-hot topic. Reserve Bank of Australia statistics show a 12 per cent increase in the total value of cash advances on last year, with Australia's total credit card balance 16 per cent higher than the same period.

Record unemployment levels are also fuelling speculation of another interest rate increase, which could make it more difficult for vulnerable consumers to repay their credit card debt.

Australia's fair trading and consumer affairs ministers have voiced their concerns and called for options to deal with lender practices.

At the recent Ministerial Council for Consumer Affairs meeting ministers considered an Australian Bankers Association initiative to introduce best practice guidelines in relation to increasing credit card limits.

The Ministerial Council said that it was pleased to see the association moving towards acknowledging the problems some consumers are experiencing as a result of inappropriate credit limit increases, however the proposed guidelines would not address the main causes of consumer indebtedness. 

New South Wales Minister for Fair Trading, the Hon. Diane Beamer MP, says that the Australian Bankers Association guidelines are too reliant on banks becoming aware of changing consumer circumstances.

New South Wales is developing a paper that examines the extent of credit card over-commitment and ways to address the issue.

'Any regulations should balance industry and consumer interests. There needs to be more responsibility on lenders to be proactive in establishing consumers' ability to deal with credit so that a cycle of debt can be avoided,' Ms Beamer says.

For more information contact the New South Wales Office of Fair Trading on 133 220 or visit www.fairtrading.nsw.gov.au

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