Some significant new rules for credit cards, APRA supervision of non ADI lenders, and some other reforms have been legislated by the Treasury Laws Amendment (Banking Measures No. 1) Act 2018.
The reforms and the operative Acts amended by this legislation are summarised in the table below.
Commencement date and operative Acts
Non-ADI Lender Rules
If APRA considers that the provision of finance by a non-ADI lender contributes to the risk of instability in the Australian financial system, APRA can make rules to be complied with by all, a specified class, or one or more specified non ADI lenders.
The date of royal assent.
Implemented by amendments to the Banking Act 1959 (Cth).
Registered Financial Corporations
The class of persons required to be registered under the Financial Sector (Collection of Data) Act 2001 (Cth) is amended to include any corporation which engages in the provision of finance in the course of carrying on business in Australia or any other class of business determined by APRA. Registration is only required when the corporation’s assets in Australia that consists of debts entered into in the course of providing finance exceed AU$50 million or such greater amount as is prescribed from time to time.
Implemented by amendments to the Financial Sector (Collection of Data) Act 2001 (Cth).
Use of the words ‘bank, banker or banking’ by ADIs
It will no longer be an offence for an ADI to use the words ‘bank, banker or banking’ in relation to an ADI’s business unless there is a determination in respect of a specific ADI preventing the use of that term. This means all mutual ADIs may use the term ‘bank’ without seeking APRA approval.
Two months after the Act receives royal assent.
Credit cards – additional responsible lending obligations for credit card contracts
A consumer’s suitability for a credit card contract or credit limit increase is to be assessed according to their ability to pay the credit limit in full within a certain period determined by ASIC.
ASIC intend to define this period by way of legislative instrument before 1 January 2019.
This requirement will apply to both new and existing credit card contracts from 1 January 2019.
1 January 2019
Implemented by amendments to the National Consumer Credit Protection Act 2009 (Cth).
Credit cards – reduction of credit limit
Credit card contracts entered into on or after 1 January 2019 must provide customers with a right to reduce their credit limit (a ’credit limit reduction entitlement’). Credit card contracts entered into prior to 1 January 2019 may also contain a credit limit reduction entitlement. If this is the case, the credit card provider must also comply with the additional requirements from 1 January 2019. The additional requirements include the following.
1. The credit card provider’s website must inform customers about the ability to reduce their credit limit and how to reduce that limit.
2. Credit card providers must not suggest that customers apply for an increase in the limit or suggest that the customer cannot reduce the credit limit.
3. Credit card providers must take reasonable steps to ensure that credit limit reduction requests are promptly actioned.
However, credit card providers are not obliged to reduce the limit below any specified minimum credit limit.
Credit cards – limits on interest charged
Credit card providers are prohibited from charging interest retrospectively to a credit card balance that has had the benefit of an interest-free period. This means that, if a credit card balance is not paid off in full by the end of an interest-free period, the credit provider will not be permitted to subsequently charge the customer interest for this interest-free period. This does not prevent the credit provider charging customers interest on any unpaid balance following the payment due date.
This will apply to both new and existing credit card contracts from 1 January 2019. However, the prohibition will only apply to transactions made on or after 1 January 2019.
Credit cards – ending contracts
Credit card contracts entered into on or after 1 January 2019 must provide customers with a right to terminate the contract (a ’credit card termination entitlement’). This entitlement imposes additional requirements on credit card providers. Credit card contracts entered into prior to 1 January 2019 may also contain this credit card termination entitlement. If this is the case, the credit card provider will also need to comply with the additional requirements from 1 January 2019. The additional requirements include the following.
1. The credit card provider’s website must specify that customers have the right to terminate and explain how to do so.
2. Credit card providers must not suggest that customers remain in a credit card contract.
Credit card providers must take reasonable steps to ensure that termination requests are promptly actioned.
Credit cards – prohibit unsolicited credit limit offers
Credit card providers must not make limit increase invitations to customers in relation to their credit card. There is no exception to this requirement, even where the customer expressly consents to receiving such invitations. This prohibition applies to all unsolicited offers that are made using any form of communication. This prohibition will apply in relation to credit card contracts entered into before, on or after 1 July 2018. However, the prohibition will only apply to communications made on or after 1 July 2018.
1 July 2018