Credit Card Ethics

CREDIT CARD LIMIT LAWS

WHAT MEASURES CAN BE PUT IN PLACE TO TRY TO SLOW THE SPIRALLING GROWTH OF CREDIT CARD DEBT IN STUDENTS?

WHAT ARE THE CURRENT LAWS?

There are current laws that dictate what financial institutions should base their criteria for credit card limit increases on.

The UCCC ( Uniform Consumer Credit Code ) is a government body that was created in response to business and consumer concerns as a national initiative to standardize credit practice within Australia.

In this code of practice there are simple laws that require credit lending facilities to provide all relevant information, and to take necessary credit checks to make sure that consumers and businesses can handle the level of potential debt.

There are many criteria that each lending facility uses for credit analyses, some including;

- Gross Income

- Current Liabilities

- Current Assets

- Weekly budgets

- Spending habits

- Dependant children

The UCCC contractually binds banks to “exercise the care and skill of a diligent and prudent banker in selecting and applying credit assessment methods and forming an opinion about the consumer’s capacity to repay”

Where there are laws that concern the provision of new credit to a consumer, there seems to be a lack of legislation to support consumers when existing credit limits are increased to a larger amount.

Banks can use an automatic credit limit increase systems that increase your limit by 25% every 6 months if all payments are made on time. Once the consumer has been initially given the credit, it is independently up to the institution itself as to increases to that limit. Many large banks run automatic increase lines that promote loyalty and increase the consumer’s debt, which in turn increase the banks assets.

Credit lines and debt especially with students have been swelling for years .

WHAT PROVISIONS CAN BE PUT IN PLACE?

There are some things that could be done to try to curb the amount of debt in young students, the first and mot important one I believe to be in education.

There are many different subjects that are compulsory to be learned at school from primary to the end of high school. Considering that most students can have access to a credit card the first year after high school is a concern especially when there is a vast lack of knowledge with finance in general, especially debt finance.

Basic finance should be compulsory in all schools, even starting in primary school, as to provide students with a basic understanding of credit