As of July 1, the Government has banned unsolicited offers to raise people’s credit limits. So no longer will people receive offers in the mail from their bank or finance company to increase the limit on their credit card or other lines of credit. This change is part of the Government’s move to ‘responsible lending’, which also encompasses a whole host of new credit and credit reporting laws. But reports are out that some lenders are attempting to offset the deadline with a host of offers that people should be wary of. Before July 1, people need to remember their own limits when it comes to finance, to avoid debt and inevitably, bad credit history.

By Graham Doessel, Founder and CEO of MyCRA Credit Rating Repairs and www.fixmybadcredit.com.au.

Recently the ABC’s 7:30 Report featured a story titled Credit card changes bring borrower warning. It interviewed industry spokespeople including Australian Securities and Investments Commission’s (ASIC) Peter Kell:

“Unfortunately ASIC has seen some of the major lenders, some of the major banks, in fact, looking at the opportunity of the introduction of these new laws to push credit onto their customer base in a way that’s inappropriate, and in a way that arguably undermines the intent of the new laws,” Mr Kell says.

“The Commonwealth Bank recently posted a notice on their website telling customers they would “lose the chance to get credit limit offers under the new laws, and miss out on the opportunity to access extra funds,” ABC’s Stephen Long reports.

“CBA gave a court-enforceable undertaking to stop the deception, but the damage was done,” Long says. He reports there were around 100,000 responses to the advertisement.

The Australian Bankers Association’s Steven Munchenberg has defended the actions of the CBA as more a ‘different interpretation’ of new legislation than an attempt to head off the new laws :

“Look, we are very, very closely regulated industry, and ASIC is doing its job by monitoring very carefully what the banks do. There are times where the banks and ASIC will interpret legislation differently, and these are new laws. What we are learning is the approach that ASIC is going to take, and the banks will be very quick to make sure they’re compliant with ASIC’s approach,” Munchenberg says.

So in other words, the banks will see what they can get away with, until ASIC raps them over the knuckles for it.

In the meantime, there are people who as Consumer Action Law Centre’s Catriona Lowe says, assume because the bank has offered them extra credit they must have been assessed as being suitable to make the repayments.

“We have seen and done research about the way in which these offers have been put together, which really encouraged people to turn off, if you like, that hard-nosed financial part of their brain, and turn on the fuzzy, “Oh yes, I deserve it, I might need it for a rainy day, the bank manager’s telling me it’s OK, I’ll just do it without thinking about it too much,” Ms Lowe says.

The ABC also reports that both Ms Lowe and Financial Counsellor Gary Rothman have seen a huge surge in offers of additional credit ahead of the start of the new responsible lending laws next month.

“It’s not uncommon for us to see people with $70,000 to 120,000 in credit card debt,” Mr Rothman says.

This report took me back to a blog post from a while back, on the notion of Affluenza. The post, titled Caught Affluenza? How it can affect your credit rating health explores the rampant notion of MORE. That we need more money, more things, and often more than we really afford.

This social disease was coined by Clive Hamilton and Richard Deniss in their book Affluenza: When Too Much Is Never Enough.

“Affluenza pulls no punches, claiming our whole society is addicted to overconsumption. It tracks how much Australians overwork, the growing mountains of stuff we throw out, the drugs we take to ‘self-medicate’ and the real meaning of ‘choice’. Fortunately there is a cure. More and more Australians are deciding to ignore the advertisers, reduce their consumer spending and recapture their time for the things that really matter.”

Basically the philosophy is we shouldn’t spend money we don’t have, on things we don’t need, and ultimately find ourselves with what we don’t want – debt, unhappiness and bad credit history.

Don’t get me wrong – I don’t advocate total credit shut-down. It isn’t very practical. Credit is necessary in today’s society. But people should use it to enhance their lives so that they can spend time with the ones they love, or to really improve their quality of life. Essentially people should make credit work for them.

I see different types of people seeking credit repair. I see many people who are perfectly capable of repaying credit, but are banned from obtaining it due to errors and inconsistencies from Creditors which lead to negative listings on their credit file. We do our darndest to help remove those from their credit reports and let people have that financial freedom back again.

But I do see a few people who have caught ‘Affluenza’, who maybe should learn the the doctrine of ‘enough’ through being banned from credit for a while.  In the same token, those people need society’s support. They need laws like the ones coming through on July 1 to curb that susceptibility to offers of more, BEFORE they end up with bad credit history. They need the Creditors – so quick to issue more, and then so quick to issue defaults reined in and checked.

That consumer shift to spending reduction and savings should be embraced by banks. New laws which seek to follow and help this psychic shift in society should not have been exploited by our banks or other Creditors in the last weeks prior to their introduction.

A bad credit rating can completely change our financial situation. The black marks like defaults or Clearouts placed there by creditors show up on our credit file for between 5 and 7 years. Bad credit can limit our choices and can perpetuate the debt cycle by leading us to choose loans with higher interest rates and more fees, so the struggle to make repayments can be even harder. People should think hard about their ability to repay any credit, whatever the circumstances to avoid this situation. But if you have bad credit history which for some reason should not be there, which is stopping you from obtaining credit that you can repay, you would be a candidate for credit repair. Contact MyCRA Credit Rating Repairs on 1300 667 218 to talk to us about how we can help you recover your ability to obtain credit and give you back your financial freedom.

Top Image: adamr/ www.FreeDigitalPhotos.net