By Gareth Vaughan
On the heels of its probe into the retail fuel market, the Commerce Commission should turn the attention of its new market study powers to the credit card market, says The Co-operative Bank's CEO David Cunningham.
Cunningham told interest.co.nz that when he heard news of the competition probe into the retail fuel market he thought "next stop credit cards."
"I think that's a real area of customer harm. I I think about the conduct and culture of banks, and doing right by customers, how is it that $4.5 billion of borrowing is via credit cards at an average interest rate that New Zealanders are paying of 17.9%?" Questioned Cunningham.
"Why isn't it that banks are saying 'you should not be in that product we're going to move you to a 13% product'," Cunningham added.
"If that $4.5 billion was at that [interest] rate that's $200 million [customers save]. So I stand back and go 'that's the harm that banks are doing to customers.' So I think there's a lack of competition in areas like credit cards in particular."
Credit cards are a "gravy train" for banks, he added.
Cunningham's comments come after interest.co.nz recently argued that, if the Financial Markets Authority and Reserve Bank are serious about making the banks they regulate consider their customers' long-term outcomes, they could start by taking a look at the credit card market.
The Co-operative Bank launched a credit card two years ago, charging annual interest of 12.95% for both purchases and cash advances. At that time Cunningham's predecessor Bruce McLachlan said credit card interest rates and fees "have been ridiculously high for too long." The Co-operative Bank now has about 16,000 credit card customers.
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