Opening address to Inquiry into Matters Relating to Credit Card Interest Rates

16 October 2015

Matthew Comyn, Group Executive Retail Banking Services, Commonwealth Bank of Australia

Thank you for the opportunity to appear today.

The Commonwealth Bank aspires to support the financial well-being of our customers through high quality, responsible products and services, and a commitment to improving financial literacy in Australia.

Our submission goes into detail about our credit card products but I would like to highlight a number of key points.

We offer a range of cards with features, benefits and price points designed to meet the needs of our customers in a very competitive and innovative market.

We are a responsible provider of credit cards, with rigorous and conservative standards around our lending.

Our assessment processes for new card applicants are robust. We reject around one third of the applications for credit cards that we receive.

When we do approve new cards we apply credit limits which are deliberately set at a conservative end of the market.

It is never in our long term commercial interests for customers to use financial products that are not designed to meet their needs.

I am comfortable that we are offering competitive and appropriately priced options to our customers.

As our submission illustrates, the RBA cash rate is only one contributor to credit card pricing.

Pricing unsecured credit through the economic cycle is a much more significant contributor to overall prices.

So too are product features like loyalty, fraud protection and technology.

I would be pleased to talk about these matters in more detail.

We view this inquiry as an opportunity to listen and to improve our industry.

There are two policy areas where I propose the industry could move quickly to address concerns.

The Committee has heard evidence that minimum repayment rates are too low and encourage a cycle of debt.

We support the industry adopting minimum repayment requirements that help customers pay down their debt in a timely and responsible manner. 

Our experience when we increased the minimum repayment amount previously was that this did cause difficulties for a small number of customers.

I do not want to see changes create hardship for any existing customer who has made an informed decision to pay the current lower level.

But this is an issue that could be worked through.

Secondly, the Committee may be aware that the Commonwealth Bank does not currently offer zero per cent interest rate balance transfers.  

The Committee has heard that zero per cent balance transfers are a debt trap.

The experience here and in other markets around the world is that customers increase their debt and many do not pay off the debt before the end of the offer period. 

It has been our view that such arrangements are not the right thing for our customers.

We believe the Committee should consider a total ban on zero per cent balance transfers, a move that would have our full support.

I look forward to taking your questions this morning.