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Credit card interest rates should be slashed with the cost of borrowing money at record lows, Victorian Treasurer Tim Pallas says.
Mr Pallas has put the banks on notice in a bid to ease the financial burden on Aussies doing it tough during the pandemic.
In a letter to his federal counterpart Josh Frydenberg and banking executives, Mr Pallas is demanding a review of the way credit card borrowing rates are set and regulated.
He said interest rates on credits cards had remained around 20 per cent despite the 0.1 per cent cash rate.
“That is unfair, it is unreasonable, and it’s unconscionable and it has to stop,” Mr Pallas said.
“The Commonwealth needs to step up.”
Mr Pallas is proposing tougher consumer protections, such as legislating a margin between the banks’ borrowing rate and a maximum credit card borrowing rate.
The only restriction on credit card interest rates is a law preventing them from going above 48 per cent.
He also quoted Reserve Bank Governor Philip Lowe, who agreed the rates were excessive and needed to be reduced.
Mr Pallas said lowering the rates would help banks “re-establish their credibility” with consumers and end the “unacceptable practice”.
Finance Sector Union State Secretary, Nicole McPherson, said they shared Mr Pallas’ concerns.
She said members faced daily pressures to sell products like credit cards to consumers and faced losing their jobs in they didn’t meet their targets.
Treasurer Josh Frydenberg was contacted for comment.
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