The Federal Parliament has recently enacted new consumer credit legislation that, among other things, bans credit card over-the-limit fees. This is a significant win for consumers, and follows the Fair Fees campaign from CFA members Consumer Action Law Centre and CHOICE. The Fair Fees campaign sought the removal of, and/or reduction in, a range of unfair penalty fees charged by Australian banks, including credit card over-the-limit fees.
The campaign has had a significant impact on other penalty fees, such as direct debit dishonour fees. Following large numbers of consumer complaints, NAB abolished penalty fees in 2009. Other banks followed suit by abolishing penalty fees or significantly reducing them. The 2011 Reserve Bank of Australia annual bank fee survey shows that penalty fee income of banks has reduced by half, from $1.6bn to around $600m since 2008.
The new credit card protection, which is to come into force from 1 July 2011, has some limitations. Credit card providers can still charge over-the-limit fees or interest if a consumer has consented to them doing so. Consumer advocates will be looking closely how such consent may be obtained, so that it is not hidden in the fine print of credit card contracts.
The legislation, the National Consumer Credit Protection Amendment (Home Loans and Credit Card) Act 2011, delivered on a number of other ALP election promises relating to credit cards and home loans, including:
- a ban on unsolicited credit card limit increase offers (unless a consumer ‘opts-in’ to receiving the offer)
- a requirement for lenders to allocate credit card repayments to higher interest bearing balances first
- new key fact sheets for home loan and credit cards.
Further consumer credit reforms, including to the regulation of reverse mortgages, consumer leases, and payday loans is expected later this year.