A busy reform agenda for the year ahead
Prompted by the Financial System Inquiry, a steady stream of parliamentary committee reports, the industry's own self-regulatory efforts and the ongoing work of international standards bodies, 2017 will see governments, regulators and the industry continue to make changes to the rules that govern banking activity. Here are ten areas of reform to watch out for next year.Card payment interchange rules will be tightened. From July next year, the credit card interchange benchmark, which is a weighted average of 50 basis points, will be supplemented by a cap of 80 bps on individual interchange rates.The cap will result in a significant narrowing in the range of interchange rates paid by different merchants.Compliance with the interchange benchmark and cap will be monitored quarterly, rather than every three years.For debit and prepaid cards, the weighted average interchange fee benchmark has been reduced from 12 cents to eight cents per transaction.Interchange-like payments to issuers in the American Express companion card system will be subject to equivalent regulation as applies to MasterCard and Visa credit card systems.There will be limits on any scheme payments to issuers that are not part of the interchange benchmarks. This is designed to prevent any circumventing of the interchange standards.Stricter responsible lending rules for credit card issuers. The Government announced in May that, in response to recommendations of a Senate Economics References Committee report on the credit card market, it would tighten responsible lending obligations applying to credit card issuers to ensure they assess suitability based on a consumer's ability to repay the entire credit limit within a reasonable period.Currently, card issuers make an assessment of the borrower's ability to meet minimum required repayments on the credit limit - typically two per cent of the outstanding balance.The Government also said it would tighten prohibitions on card issuers making unsolicited credit limit increase offers, including the ability to seek prior consent.Small amount credit contract and consumer lease reforms. The Government accepted the key recommendations of the Review of Small Amount Credit Contracts, which include extending the protected earnings amount regulation and capping consumer lease charges.Under the current rules total SACC repayments cannot exceed 20 per cent of gross income for Centrelink recipients. The cap will be reduced to ten per cent of net income each repayment period and apply to all consumers.Consumer leases will also be subject to a cap on total repayments.External dispute resolution schemes may merge. A review panel set up by the Treasurer to review the effectiveness of external dispute resolution schemes in the financial services industry has recommended that the three established schemes should be merged into one. As a first step the Financial Ombudsman Service and the Credit & Investments Ombudsman would be merged.The Superannuation Complaints Tribunal would be transformed from a statutory scheme into an industry scheme along similar lines to FOS and CIO, and then consideration should be given to further integrating the schemes to create a single scheme.In other recommendations, the panel said monetary limits should be increased, there was merit in the