On August 10 2015, the St Vincent de Paul Society made a submission on credit card interest rates to the Senate Standing Committees on Economics.

Executive Summary 

Credit card interest rates and fees have a disproportionate impact on those Australians living with the most disadvantage. They reflect just one of a range of structural barriers that continue to work in Australia to stop those who are struggling from getting ahead.

For these reasons, the Society recommends legislating that credit card interest rates align with changes in RBA cash rates, and bank fees are reduced to a sufficient level as so to be affordable to low income earners. The Society also recommends acknowledging the impact of credit card interest rates on the limited budgets of those receiving Newstart, or other social security payments, and we repeat our call for Newstart payments to be increased by at least $50 per week.

The Committee has now reported: http://www.aph.gov.au/Parliamentary_Business/Committees/Senate/Economics/Credit_Card_Interest/Report. The report broadly supported our argument that those on low incomes are hit hard by credit card interest rates (our submission is quoted on p 20).  However, instead of taking up our suggestion that an appropriate response was to legislate so that falls in the RBA cash rate were passed on to credit-card users, the Report supports market-based mechanisms, like increased competitiveness, and heightened consumer awareness (at 3.21).  While we believe that the market has failed so far in protecting these consumers, we would support any new market-based measures to drive down the costs of credit cards to the poorest Australians, including increased competition (though any deregulation must be pursued with caution) and increased education of consumers of financial products (Recommendation 9).  We would argue, further, that these programs should be targeted at the most vulnerable: older and younger credit card users, Australians with less education, those from non-English speaking backgrounds, and those on the lowest incomes.  The Committee’s suggestion that “credit card advertising and marketing material should be required to include a prominent statement of a card's ongoing headline interest rate and annual fee” is a step in the right direction, and we strongly endorse Recommendation 3:  government work with key stakeholders to develop a system that informs consumers about their own credit card usage and associated costs.  St Vincent de Paul is definitely keen to partner with government in developing such a system.