Consumer Credit Protection Amendment (Home Loans and Credit Cards) Bill 2011 makes
a number of reforms to lenders’ practices for home loans and credit cards. For example,
it requires lenders to publish key fact sheets for both these products, which
will make it easier for consumers to compare products. Additional reforms for
credit cards are:
n preventing lenders
sending unsolicited limit increase offers to individuals, unless they elect to
n preventing lenders
charging fees where a consumer goes over their credit limit, unless the
consumer elects to be able to go over their credit limit; and
n requiring lenders to
pay off consumers’ debt with the highest interest, unless the consumer elects
The most important reform concerns unsolicited credit limit
increase offers to individuals. The committee heard consistent evidence during
the inquiry that the aggressive marketing by banks of limit increases was a key
reason why some consumers have credit problems. Credit cards have a number of
unique features, two of which are high interest rates and that consumers are
only required to pay a very small amount each month. Aggressive marketing by
the banks appears designed to put consumers at the limit of their credit
capacity, whereupon the unique features of credit cards mean that the
individuals concerned are paying interest with little capacity to reduce the
While the ‘debt treadmill’ may be good for bank profits, it
has significant social costs and this is why the committee supports the Bill.
The committee also supports the Bill because it will
increase competition in the market and make consumers better off. Therefore,
while there will probably be transition costs for lenders, the extra compliance
should have no impact on prices for consumers due to increased competition.
Costs for lenders should be further reduced because many have already
voluntarily adopted some of the reforms.
In addition to recommending the Bill’s passage, the
committee is also recommending that the commencement date for fact sheets for
home loans be set back from 1 September 2011 to 1 January 2012. This is because
the industry has consistently stated that they need more time to prepare their
systems and Treasury has agreed that this is the case. Industry has also stated
that end of year is a busy period, so the committee believes that ASIC should
be practical in how it enforces home loan fact sheets in the early weeks of
I would like to thank those organisations that assisted the
committee during the inquiry through submissions or participating in the
hearing in Canberra. I also thank my colleagues on the committee for their
contribution to the report.
Craig Thomson MP
Terms of reference
On 11 May 2011 the Selection Committee asked the Committee
to inquire into and report on the National Consumer Credit Protection Amendment
(Home Loans and Credit Cards) Bill 2011.
Under Standing Order 222(e), the House is taken to have
adopted the Selection Committee’s reports when they are presented.
List of recommendations
2 Analysis of the Bill
Clause 2 of the Bill be amended so that the commencement date
for the provisions relating to Key Fact Sheets for home loans be set back to
1 January 2012. ASIC should take a practical approach to enforcing the
provisions in the initial weeks after commencement.
Subject to the other recommendation in this report, the House
of Representatives pass the Bill.