Federal Labor and crossbench senators have ganged up to hold an inquiry into credit card interest rates, now at an historic high above the Reserve Bank of Australia’s official cash rate.



The opposition leader, Bill Shorten, and Labor senator Sam Dastyari have written to the prime minister, Tony Abbott, seeking his support for the Senate inquiry.



“There is indisputable evidence that families and small businesses are being dudded,” they said in a statement on Sunday.



While the Reserve Bank has slashed its cash rate by 275 basis points since 2011 to a record low of 2%, the average standard credit rate remains relatively unchanged at 19.75%.



A spokesperson for treasurer Joe Hockey said the government will look at Shorten’s proposal as it prepares to respond to its financial system inquiry, which included credit card-related matters.



Treasury is also coordinating a review with other members of the Council of Regulators into the issue.



“We will continue to work in a methodical way to improve consumer outcomes for Australian credit card holders,” the spokesperson said.



Independent senator Nick Xenophon said that for far too long credit cards have been a lazy way for banks to bolster their profits, describing it as the “great credit card gouge”.



“Millions of Australians are paying billions of dollars needlessly with their cards,” he said in a statement.



The inquiry would be chaired by senator Dastyari and would hear from banks, affected consumers and consumer groups that have been pushing for change.



Xenophon hopes it will provide the opportunity to canvass new law options that include greater transparency and whether there should be a ceiling on the difference between the cash rate and credit card rates.



He also wants banks to fund financial counselling for those caught in the credit card trap and to offer alternative options to those seeking credit, such as lower interest personal loans.



The South Australian senator intends to release draft legislation by the end of the year.