CBA boss defends card rates
THE head of Australia’s largest and most profitable bank says credit card interest rates are being set responsibly but the Federal Government’s chief policy advisers say that more needs to be done to keep banks honest.
As federal senators examine credit card rates, Treasury has suggested restricting rate increases on existing balances and limiting the “backdating of interest on purchases to only that portion of the balance that was not paid off within the interest-free period”.
While the ideas have the potential to save consumers hundreds of millions of dollars in interest each year, Treasury is concerned that banks could claw back lost profits via “increases in headline interest rates, fees, reductions in interest-free periods and balance transfers offers, and less generous rewards programs”.
It appears that for this reason, Treasury has recommended a different course of action to the federal senators.
In its submission to their inquiry, it suggests forcing the majors to reveal their funding costs publicly in a bid to increase pressure to pass on Reserve Bank of Australia interest rate cuts.
It would “provide an additional level of pricing scrutiny”, Treasury said.
It also favours a crackdown on “consumers receiving credit cards and credit limits that are inappropriate to their financial requirements”.
Commonwealth Bank boss Ian Narev yesterday said he was willing to appear before the inquiry.
“A consumer who thought that it was a rort would know that it is a competitive market (and) … being priced by people who are taking a responsible look though the (economic) cycle,” he said.