Government advised to control credit

The Australian Bankers Association (ABA) has warned that the government needs to control consumer's access to credit if it wants to tighten up controls in the financial industry.

The recommendations, made by the ABA in the banking code review, said that the code should include legal provisions that require a credit provider to carry out an assessment before entering into a credit contract.

In the review, the ABA and the Mortgage & Finance Association both proposed a Uniform Consumer Credit Code to protect the consumer.

The principal solicitor at the Consumer Law Centre of the ACT, David Tennant, said: "The way things work at the moment a bank could give a customer an extension to their credit limit based on historical information on that customer.

"It could be out of date but there is no obligation to make a current assessment. The Code should include a positive obligation to ask the customer some questions at the time credit is advanced."

The banking code was introduced in 1996 and is reviewed every three years. On this occasion, the ABA has made 44 recommendations in an effort to tighten-up various areas of the financial sector.

These cover a variety of things including credit assessment, hardship, debt collection, guarantees, reverse mortgages, fees and charges, direct debits, electronic banking, opening of accounts and chargebacks.

Credit card usage has doubled in Australia over the past ten years and although the market cooled slightly in 2007, the country's collective credit card debt surpassed $40 billion last year.

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