The Treasury Laws Amendment (Banking Measures No. 1) Bill 2017 has been introduced into to the House of Representatives to implement, amongst other things, credit card regulation changes. Background.
UPDATE February 2018: Bill passed.
UPDATE: Royal Assent given on 5 March 2018.
Schedule 5 to the Bill amends the National Credit Act to introduce four principal changes:
Reform 1: tighten responsible lending obligations for credit card contracts
Part 1 of Schedule 5 to the Bill introduces a new requirement that the unsuitability of a credit card contract or credit limit increase for a consumer be assessed according to whether the consumer could repay an amount equivalent to the credit limit of the contract within a period determined by ASIC.
This requirement will apply to licensees that provide credit assistance, and licensees that are credit providers, in relation to both new and existing credit card contracts from 1 January 2019. Existing civil and criminal penalties for breaches of the responsible lending obligations will apply to breaches of the new requirement. Existing infringement notice powers will also apply.
Reform 2: prohibit unsolicited credit limit offers in relation to credit card contracts
Division 1 of Part 2 of Schedule 5 to the Bill prohibits credit card providers from making unsolicited credit limit offers in any form. This is achieved by broadening the existing prohibition to all forms of communication and removing the informed consent exemption. These amendments apply in relation to both new and existing credit card contracts from 1 July 2018. Existing civil and criminal penalties for breaches of the prohibition against unsolicited credit limit offers will apply. Existing infringement notice powers will also apply.
Reform 3: simplify the calculation of interest charges under credit card contracts
Part 3 of Schedule 5 to the Bill makes amendments which prevent credit card providers from imposing interest charges retrospectively to a credit card balance, or part of a balance, that has had the benefit of an interest-free period. These amendments apply in relation to both new and existing credit card contracts from 1 January 2019.
Failure to comply with this requirement attracts civil penalties of 2,000 penalty units ($420,000) and is an offence, attracting criminal penalties of 50 penalty units ($10,500). It is intended that consequential amendments will be made to the Credit Regulations to extend the infringement notice scheme contained in the Credit Act to contraventions of the civil penalty provision.
Reform 4: reducing credit limits and terminating credit card contracts, including by online means
Division 2 of Part 2 and Part 4 of Schedule 5 to the Bill requires credit card contracts entered into on or after 1 January 2019 to allow consumers to request to reduce the limit of their credit card (a ‘credit limit reduction entitlement’) or terminate a credit card contract (a ‘credit card termination requirement’).
Where a credit card contract contains a credit limit reduction entitlement or a credit card termination requirement, the amendments also require that:
• the credit card provider must provide an online means for the consumer to make a request to reduce their credit card limit or terminate their credit card contract; and
• if the consumer makes a request to reduce their credit limit or terminate their credit card contract, the credit card provider must not make a suggestion that is contrary to the consumer’s request and must take reasonable steps to ensure that the request is given effect to.
These amendments apply to credit card contracts entered into before, on or after 1 January 2019.
Failure to comply with these requirements attracts civil penalties of 2,000 penalty units ($420,000). It is intended that consequential amendments will be made to the Credit Regulations to extend the infringement notice scheme contained in the Credit Act to contraventions of the civil penalty provisions.
A breach of the requirement that a credit card provider not make contrary suggestions or the requirement to give effect to the request are offences that attract criminal penalties of 50 penalty units ($10,500).
