Australian labor government pledges to end over-the-limit credit card fees

Australia’s major banks have slammed a Labor election promise to ban lenders from charging fees if their consumers exceed their credit card limit.

Under existing laws, customers can be slugged up to $25 if their bill goes over a spending threshold.

But Labor wants to change that so lenders would be prevented from drawing a credit card account over the maximum limit without the consent of the consumer.

The government also proposes to ban unsolicited credit limit extension offers.

Prime Minister Julia Gillard said Labor was targeting problems of “community concern”.

“Lots of Australians would have got a shock when they got their credit card bill and they’d run up debts over what they thought was their limit,” she told reporters in Melbourne.

“Lots of Australians would have got a shock when they realised how quickly interest was going to escalate on their credit card and that’s often because even though Australians seek to shop around, they don’t have the ability at the moment to compare interest rates because they’re not displayed off the same basis.”

But the Australian Bankers’ Association, which represents major banks, said the Labor policy was unnecessary because the “vast majority” of Australians used their credit cards responsibly.

The association’s chief executive Steven Munchenberg also said banks already consulted consumers if they wanted to raise credit card limits.

“Customers have a choice – while a credit card or credit limit is offered, the customers can always ignore or decline the offer,” he said in a statement.

Credit card default had more to do with unemployment, illness and family breakdown than bank marketing, he added. –AAP