The charges related to 24 different incidents in which credit cards were stolen. Credit:Jessica Shapiro These can occur with credit cards because their very low minimum repayments mean some customers can spend years paying off minimal principal as their debt attracts interest rates of around 20 per cent a year. Draft legislation would force banks to only issue credit limits that could be repaid in an unspecified "reasonable" period, alongside a ban on banks making unsolicited offers of credit limit increases. That contrasts with current rules, which say credit card contracts are "unsuitable" if a customer cannot repay the loan without "substantial hardship", such as being forced to sell their house to pay off the debt. The Consumer Action Law Centre backed the reforms, but said banks should only approve limits that could be paid in three years. This would encourage consumers to use cards as a short-term source of finance, rather than long-term debt, it said.

Three years was still "generous" for banks, it said, pointing out that paying back a $10,000 debt over three years at an interest rate of 20.4 per cent would mean paying more than $3000 in interest. "A three-year assessment rule should provide a sufficient amount of credit for consumers to use credit cards for necessary purposes, while at the same time preventing debts from growing to the point where they become an unmanageable long-term debt obligation," it said in a submission. Even so, banks are hesitant to put such a cap on the lucrative credit card market. The Australian Bankers' Association's submission warns of "significant unintended consequences" of the rules as they are drafted, saying they could mean some borrowers would have their credit limits cut.

It said it would discuss with Treasury what was a "reasonable" repayment period for card debt to be repaid. Other banks did not provide their submissions on the draft legislation, but earlier submissions from banks have pushed for a much longer time frame than three years. Westpac told Treasury in June that seven years was a reasonable repayment period, because this is the typical term of a personal loan. The bank's argument was that most customers used cards as a short-term way of smoothing their cash flow, with 98 per cent of customers paying more than the minimum repayment. Loading The Customer Owned Banking Association also said in June it thought a period of up to 10 years was reasonable, and pushed for low-limit cards to be excluded from this rule change, so that lower-income borrowers were not denied credit. The reforms come after previous Treasury research found a "significant minority" of credit card consumers were being wrongly given credit cards, which they then used in ways that left them suffering a "large burden on their financial and general wellbeing".