The Courier-Mail

CBA boss de­fends card rates

- JOHN ROLFE

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.

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