Pre-approved increases in limits on credit cards will be made illegal by mid 2012 if a returned Labor government adopts a banking policy announced yesterday.
Offers for increased limits, as well as offers for new credit cards, are already covered by the responsible lending provisions of the National Credit Code that came into effect last month.
The ALP's latest proposal would make it difficult for banks to promote pre-approved increases in credit without the prior agreement of customers.
An online survey by Research Now and used by The Australia Institute (a think tank) in a recent report on banking found that two in three respondents reported receiving an unsolicited offer for a new credit card in the past 12 months, while one in two received an unsolicited offer to increase their credit card limit.
Other changes proposed include rules to prevent banks from allowing customers to borrow in excess of their credit limit and thus incur penalty fees. This is one class of fees that did fall as a result of the price changes introduced by National Australia Bank in late 2009 and to some extent copied by most banks.
Banks will also have to agree a standard method for working out interest due on credit cards and to apply repayments in a consistent manner, with the most expensive credit card debt paid down first.
While the Labor Party set up a special web page to promote its "
Fairer Simpler Banking" policy, the policy does not address any issues other than aspects of credit card product design and practice.