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Connexus : Issue 40
Change is on the cards Changes to credit card rules are keeping mutuals busy. BY CHRISTINE LONG ASIC will be keeping a watchful eye on how fnancial institutions implement the new requirements of the National Consumer Credit Protection Act covering credit cards. Michael Funston, who leads the compliance team at Abacus, believes that once the requirements are bedded down they will become the focus of regulator attention. "ASIC is unlikely to take a hard line initially, as long as licensees can demonstrate they're making genuine efforts to become fully compliant. Before long, however, the regulator will be regularly reviewing compliance with these new provisions," says Funston. "Consumer debt, especially credit card debt, continues to be a highly politicised topic, and ASIC will want to be seen to be active in this area." had required the provision of a generic example -- say on an outstanding balance of $3000 -- rather than tailored information on every account statement. The industry would have saved a lot of additional cost. "Unfortunately our view, shared by other industry participants, did not prevail on this topic," says Funston. Over-the-limit fees Another critical reform likely to affect the industry is the new rule on over-the- limit fees. “It creates diffcult operational issues for our members in that they need an opt-in agreement from the consumer and they have to make sure that agreement hasn't been withdrawn by the consumer. So that imposes signifcant documentation and systems adjustments as well," says Funston. In ter ms of compliance, Funston says the rules that seem to have caused Abacus members that issue credit cards the most "grief" were those relating to the order of payments and the account statement warnings. "Some members will have had to adjust how they allocate payments to the various parts of the outstanding balance," he says. "This may have revenue implications and it will have required expensive software changes. All issuers will also have incurred signifcant costs in modifying account statement software to allow personalised minimum monthly payment warnings to be provided on every statement. "In Abacus's view, the gover nment could have achieved substantially the same awareness-raising outcome if it a ban on over-the-limit fees unless agreed to by the customer tailored warning on account statements about the efect of making only minimum monthly repayments the provision of credit card key facts sheets to people applying for a credit card strict regulation of the provision of unsolicited ofers of credit limit increases a requirement payments be directed to the outstanding balance attracting the highest interest frst, unless a variation is requested by the consumer and agreed to by the institution. The new rules New requirements of the National Consumer Credit Protection Act apply from July 1 covering: 2 3 4 5 1 14 Connexus NEWS