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Payment cards: Regulatory pressure reduces AMEX penalty rates in Australia

BIScom Subsection: 
Author: 
Editorial Staff

As a result of concerns raised by ASIC, American Express Australia Limited has agreed to change its approach to the charging of a higher ‘default’ rate of interest to credit card customers who have defaulted in their payment obligations. The policy currently affects 7.9% of credit card accounts issued by AMEX. As a result of the changes the holders of those accounts will receive a reduction in interest rate of up to 6%.

AMEX’s policy was to increase the interest rate on the whole balance where a card holder had defaulted in making their minimum monthly repayment three or more times over 12 months or on one repayment for more than 3 months. The increase in rates for affected customers was up to 6% for a 12-month period. ASIC was concerned that this policy was potentially in conflict with the restrictions on the charging of default interest under the National Credit Code.

ASIC Commissioner Peter Kell said, ‘ASIC considers that the policy intent of the National Credit Code is to limit the level of increased charges which may be imposed on a borrower in default, and ASIC welcomes AMEX’s agreement to change its interest rate practice.’

The changes will be made for affected customers starting from 28 February 2012 with all affected customers having their interest rate reduced to their normal rate by the end of March 2012.

Source: ASIC

 


 

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