Anz Introduces Cap On Credit Card Borrowing
The Age
Monday November 21, 2005
ONE of the big four banks has broken ranks and will stop encouraging financially vulnerable customers to accept higher credit card borrowing limits.
The ANZ will today launch a responsible lending code prohibiting credit card limit increases to customers with a poor recent credit record or those having difficulty meeting repayments. Customers on a fixed income will also no longer receive unsolicited offers of credit limit increases. Consumer advocates have campaigned for tighter controls on credit card limit increases. Consumer Federation of Australia chairwoman Catherine Wolthuizen said ANZ's decision would pressure other lenders to adopt similar restrictions. "One of the big four is breaking ranks and showing it can run its lending business on a more responsible basis. We call on other banks to do so as well," she said. Ms Wolthuizen said unsolicited offers of credit card limit increases were a financial hazard for many, especially people who had just retired and those between jobs. "Hopefully this will see a reduction in the number of cases of overcommitment when people's financial circumstances change." Last month a Senate committee report called on all state governments to force lenders to check borrowers' capacity to pay before issuing new credit cards or raising credit limits. Only the ACT now requires lenders to check customers' financial circumstances before increasing their credit limit. The practice of lifting credit card borrowing limits without assessing a customer's capacity to pay had led to an increase in credit disputes, the Banking and Financial Services Ombudsman told the Senate committee. ANZ, with more than 20 per cent of the credit card market, will release a survey this week believed to show that about 3 per cent of people feel their finances are out of control. It is also believed to have found that people with the lowest levels of financial literacy include low-income singles, those aged 18 to 24, those over 70 years and those with less than $5000 in savings. ANZ's head of personal banking, Brian Hartzer, said the new lending code would be the first adopted by an Australian bank. The outstanding debt on credit cards reached a record $32 billion in September, Reserve Bank figures show.
© 2005 The Age
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