New credit card rules aim to protect consumers

The Australian Securities & Investment Commission (ASIC) has announced new rules for banks and credit providers aimed at preventing consumers from getting into too much debt.

The rules will require banks and credit providers to cap the credit limit at the amount the consumer is able to repay within three years.

ASIC said the three-year period strikes an appropriate balance between protecting consumers and ensuring they still have reasonable access to this type of financing.

The decision comes after the commission’s July report, which revealed almost 2 million people were struggling with debt.

According to Finder, Australians spend around $26.6 billion on credit cards each month, with the average purchase coming in at $118.69.

ASIC has provided guidance on how banks and credit providers should assess consumers’ ability to repay the limit within three years.

The includes guidance on credit card account fees, interest rates charged on credit card contracts and the effect of the reform on responsible lending assessments for other credit products.

The new legal requirement commences on January 1, 2019. Credit providers are expected to have systems in place to ensure that that they can meet the new obligations.

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