Banks disagree with Labor’s election promise to prohibit penalty fees charged to credit card holders who exceed their credit limits.

Current regulations allow for penalty fees of up to $25. However, Labor has proposed banning credit card issuing companies from allowing a card to exceed its agreed credit limit, without the agreement of the card holder.

In addition, the current government wants to prohibit credit card companies offerring higher credit limits without the card holder’s request.

Prime Minister Julia Gillard referred to these as “community concern” issues deserving more stringent regulations.

“Lots of Australians would have got a shock when they got their credit card bill,” she said, “and they’d run up debts over what they thought was their limit.

“Lots of Australians would have got a shock when they realised how quickly interest was going to escalate on their credit card, and that’s often because even though Australians seek to shop around, they don’t have the ability at the moment to compare interest rates because they’re not displayed off the same basis.”

But Steven Munchenberg, chief executive of the Australian Bankers’ Association representing the major banks, disagreed with this assessment. He called more stringent regulations unnecessary, as the “vast majority” of Australians know how to manage their credit cards, and the banks already defer to their customers’ wishes regarding raising credit limits.

“Customers have a choice,” said Mr. Munchenberg. “While a credit card or credit limit is offered, the customers can always ignore or decline the offer.”

Card holders defaulting on their credit card balances is due more to individual crises such as a lost job, illness, or family problems, claimed Mr. Munchenberg, rather than banks pushing too much credit on customers.

Source: http://news.smh.com.au