One in six consumers is now piling up credit card debts.
A review by the Australian Securities and Investments Commission review into credit card lending in Australia found that 18.5 per cent of consumers are struggling with credit card debt.
The review looked at 21.4 million credit card accounts open between July 2012 and June 2017.
It found that there were almost 550,000 people in arrears in June 2017. That was on top of 930,000 with persistent debt and an additional 435,000 people repeatedly repaying small amounts.
The review also found that consumers are also being provided with credit cards that don’t meet their needs. For example, many carry balances over time on high interest rate products, when lower-rate products would save them money.
“Our findings confirm the risk that credit cards can cause financial difficulty for many Australian consumers’, ASIC Deputy Chair Peter Kell said.
He said ‘”only a handful of credit providers take proactive steps to address persistent debt, low repayments or poorly suited products. There are a number of failures by lenders to act in the interests of consumers and we expect them to respond swiftly to our findings.”
Despite rules introduced in 2012 that require lenders to apply repayments against amounts accruing the highest interest first, ASIC found that four lenders – Citi, Latitude, American Express and Macquarie – have retained old rules for grandfathered credit cards open before June 2012.
And the banks were cleaning up big time – as a result of these old rules, almost 525,000 consumers had paid more interest.
“There are a number of failures by lenders to act in the best interests of consumers,” Mr Kell said.
“We expect them to respond swiftly to our findings and we will be following up to ensure the problems we have identified are addressed.”