BANKING INDUSTRY INITIATIVES ON DEBT
Sydney, 28 July, 2004: The Australian Bankers’ Association (ABA) is outlining some industry initiatives and facts on debt so that public policy discussions on these issues are based on sound information.
A meeting discussing issues around youth debt will take place this evening in Broadview, South Australia. The meeting is planned to cover a number of topics such as problems with mobile phones and gambling debts, as well as banks and lending.
In March this year, the ABA announced some credit card debt initiatives to assist bank customers, including young adults, to manage their household finances.
David Bell, Chief Executive of the ABA, said: “These initiatives are designed to give customers, including young adults, more information to make informed choices about credit and its management.”
“The ABA and member banks have been listening to community concerns over problems associated with debt. The initiatives announced are to assist in addressing a number of the concerns about credit card marketing.”
“Australian banks are vigilant about their lending practices and Australia currently has very low levels of credit card default (see graph on page 2) indicating the vast majority of Australians manage credit well. Nevertheless, the banking industry wants to provide improved services where possible,” Mr Bell said.
The revised ABA Code of Banking Practice requires banks to support:
· a lending standard that before a bank offers or gives a credit facility or increases an existing credit facility, the bank will exercise the care and skill of a diligent and prudent banker in selecting and applying their credit assessment methods and in forming their opinion about the customer’s ability to repay the facility; and
· with the customer’s agreement, to try and help the customer suffering financial difficulties with their bank loan, overcome those difficulties.
The four debt initiatives announced in March include:
1. Banks have agreed to provide information in letters, to customers offering increased credit card credit limits, on how much more customers have to pay each month, if they take up the offer. The customer will then easily be able to assess the increased repayments needed if they use the additional credit.
2. Advice to customers, included in marketing material, that if their personal circumstances have recently changed, for example loss of employment, or are likely to change, for example maternity leave, they should not accept any credit card credit limit increase offer, and should immediately contact their bank.
3. A capacity for individuals to opt for a lower credit card credit limit than the increase their bank has offered. For example, a customer can opt for a $1000 limit increase in preference to the $2000 limit increase offered.
4. An industry benchmark that any ABA member bank customer can reduce their credit card credit limit:
(a) if the bank has a telephone facility to do this – within 24-business hours of receipt of the request;
(b) in any other case – within 48-business hours of receipt of the request.
In addition, the ABA agrees with community leaders that better education could assist many groups in our community. The ABA is developing a credit education booklet to assist consumers better understand how to use, choose and manage credit. The aim is to help customers and the community become aware of how credit works, how to manage it and the responsibilities that come with taking out a credit card or personal loan.
This publication, ‘Smarter Banking – Make Credit Work for You” will soon be available. This publication forms part of the industry’s long-term strategic priority of helping improve Australians’ financial literacy. Individual banks also produce similar material.
The ABA welcomes the opportunity to participate in the meeting in Broadview, South Australia, and to discuss these issues.
Credit card default rate
Source: Visa International, The Credit Card Report, November 2002
For further information:
Heather Wellard
ABA Public Relations
Phone: 02 8298 0411
Mobile: 0409 830 439
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