Consumer advocate CHOICE has welcomed the initial support packages announced by the banks, but it has opined that these can go further.
“We have Australians who are now out of work but still paying over 20 per cent interest on credit cards. The fair thing to do is acknowledge that we’re in a record-low interest rate environment and ensure that all bank customers who are struggling to make repayments have access to relief,” said Alan Kirkland, CEO of CHOICE.
While clarifying that banks should not forget the lessons learnt from the banking royal commission, Mr Kirkland said they need to do more to look after their customers.
As such, CHOICE has written to the banks seeking five urgent COVID-19 actions, among them a six-month pause on debts, a credit card interest cap at 10 per cent and a waiver of long-term credit card debt.
“We’ve written to each of the major banks, asking them to take these five urgent actions to help Australians who need it now,” Mr Kirkland said.
While the government has talked extensively about hibernating the economy, Mr Kirkland believes the same approach is needed for people who have lost their jobs and income.
“The major banks are allowing payments to be deferred on mortgages, but they will continue charging interest while payments are paused. Their response to people with credit cards and personal loans has been piecemeal at best,” he opined.
“The banks should offer to pause all debts for people in hardship with no exceptions. All interest, fees and charges should also be paused, so that people in hardship don’t end up with larger debts.”
As for the credit card interest, Mr Kirkland judged that interest rates “remain stubbornly high on credit cards”.
“Right now only two credit card products offered by the big four banks have an interest rate below 10 per cent. This is outrageous when banks are reaping the benefits of a 0.25 [of a percentage point] cash rate. It’s time to lower interest rates for all customers.”
Furthermore, in 2018 one in six Aussies was struggling with persistent credit card debt. Urging the banks to keep an eye on this figure, Mr Kirkland said banks should strongly consider waiving “long-term credit card debts that people are unlikely to ever be able to repay”.
The CHOICE CEO also advised the banks to prove that they’ve learnt their lessons by recommitting publicly to the suite of reforms from the banking royal commission.
“The banking royal commission revealed misconduct that sees customers owed hundreds of millions of dollars in remediation but banks are taking far too long to pay out. We need the banks to hurry up and get this money back to Australians at a time when they need it the most.”