Victorian Treasurer Tim Pallas has called on the federal government to tie credit card interest rates to the official cash rate, calling current limits “unconscionable”.
Mr Pallas has written to federal Treasurer Josh Frydenberg and the heads of Australia’s major banks, asking them to review credit card interest rates.
He said banks had benefited from excessive interest rates while consumers struggled off the back of tough economic times.
The current cash rate is 0.1 per cent, and Mr Pallas took aim at “interest rates on credit cards upwards of 20 per cent”.
“This is unreasonable, it’s unfair, it’s unconscionable and the banks really do need to amend their behaviour,” he said.
The Victorian push follows comments made by Reserve Bank governor Philip Lowe in February, where he expressed “frustration” about the high interest rates on some credit cards.
He urged Australians to find “better products” and move away from the high-interest cards.
The Treasurer said he shared Dr Lowe’s frustrations.
“We believe that consumers should not be exposed to an unreasonable or an unfair burden as a result of excessive rates,” Mr Pallas said.
Current rules in place cap the maximum interest rate at 48 per cent.
“In the current interest rate environment, those sort of protections are woefully inadequate,” Mr Pallas said.
The state is calling on the Commonwealth to investigate the option of mandating a maximum margin between the cash rate and the interest on credit cards, similar to rules under the National Consumer Credit Protection Act.
The Treasurer said any changes would help Australians having to rely on short-term credit as a way of making ends meet during the economic downturn caused by COVID-19.
“We know that banks have benefited from excessive interest rates for far too long, and it’s time that they do the right thing and start earning back the public’s respect,” he said.