ASIC has issued a consultation paper Credit cards: Responsible lending assessments (CP 303) which proposes that from 1 January 2019 responsible lending assessments for all classes of credit card contracts be based on whether the consumer can afford to repay the credit limit within three years.

Under s160F of the National Consumer Credit Protection Act 2009, ASIC has the power to prescribe the period to be used for assessing whether a credit card contract or credit limit increase is unsuitable for responsible lending assessments. Background.

Consumers that cannot repay the proposed limit of the credit card contract within the period prescribed by ASIC are taken to only be able to comply with that contract with substantial hardship with the result that entering into the contract or providing credit assistance in relation to the contract would be a breach of the responsible lending obligations.

The revised obligations will apply to licensees that are credit providers or that provide credit assistance in relation to both new and existing credit card contracts from 1 January 2019.

The purpose of this proposal is to make sure that consumers can afford to repay their credit card debts within a reasonable period. Consumers will still retain the flexibility to make low minimum repayments on credit cards.

ASIC says it is proposing a three-year period to strike an appropriate balance between preventing consumers from being in unsuitable credit card contracts and ensuring that consumers continue to have reasonable access to credit through credit card contracts.

ASIC’s report Credit card lending in Australia (REP 580) finds that while credit cards offer flexibility, it found that 18.5% of consumers are struggling with credit card debt. In June 2017 there were almost 550,000 people in arrears, an additional 930,000 with persistent debt and an additional 435,000 people repeatedly repaying small amounts.

ASIC reviewed 21.4 million credit card accounts open between July 2012 and June 2017.