|Q.14 Do you agree that credit and finance card limit increases should be opt-in only? |
Should there be a timeframe from when the credit is first arranged to when the lender can make an approach with a limit increase?
There was a very strong consumer preference that credit and finance card limit increases be opt-in only. Some submitters noted this form of easy access to credit can lead to overburdensome debt. Some noted that the current opt-out model does not work well as many consumers passively accept and use the credit based on the ease of access to it rather than making a proper consideration of their borrowing needs.
The banking industry generally supported that credit and finance card limit increases should be opt-in. Only one of the banks did not support this proposal. The banks commented they generally only offer credit extensions when credit histories have been established or certain timeframes have elapsed.
These submissions were made on the basis that the proposals do not affect the operation of section 15(1)(b) which allows that unarranged overdraft or credit situations are not covered by the scope of the CCCFA.
The wider lending industry and some of their representatives generally supported the proposal, though some submitters did not. There was less support for the setting of timeframes for new approaches offering credit limit increases on the basis that the first opt-in proposal would mean the borrowers would make the decision whether the credit offer suited them or not. This would eliminate the need for a time delay for approaches offering additional credit.