Australians might find it harder to get high-limit credit cards under proposed laws aimed at curbing growing debts.
Banks will also be banned from inviting customers to increase limits and be forced to provide an online option to cancel cards or reduce credit.
The changes are part of a suite of measures targeting the financial sector that Treasurer Scott Morrison introduced to parliament on Thursday, including a proposal to force top bank executives to defer part of their pay if they breach certain rules.
Too many Australians are burdened with excessive credit card debt and substantial interest charges, Mr Morrison told MPs.
More than 30 per cent of credit card holders on low incomes carry interest-bearing debt from bill to bill and are not sufficiently protected under the existing regulations.
As it stands, credit card providers are only required to check if a borrower can meet minimum repayments when deciding if a consumer can afford a credit limit.
"As a result, consumers can be granted excessive credit limits (but) which can lead to cycles of debt," Mr Morrison said.
On top of that, the calculation of interest was complex and hard to understand, while switching cards or lowering credit limits is an onerous process.
The draft laws will force providers to base their affordability assessments on whether a customer can repay the full credit limit within a "reasonable period" - to be determined by the corporate watchdog, ASIC.
They will also ban unsolicited invitations to increase credit limits - be it in writing, by phone or online - even if someone has previously opted in to receive them; prevent providers from charging backdated interest; make it easier for customers to understand and compare how interest is calculated and also require providers to have an online option to cancel a card or reduce limits.
"These reforms are a necessary and important step in reducing incidents of consumers building up unmanageable credit card debts and improving competition in the credit card market," Mr Morrison said.
In a separate bill, the government has proposed forcing top bank executives to defer part of their pay for four years if they don't meet certain obligations.
Banking regulator APRA will have the power to disqualify senior directors and executives directly without the need to apply through a court.
Civil penalties will also be substantially increased - up to $210 million for some institutions - for breaches that relate to prudential matters.
As well, APRA will be given enhanced powers to more effectively prepare for and manage a crisis should it befall one of Australia's banks and insurers.
Mr Morrison says the changes represent the most significant overhaul of the regulator's powers since it was founded by John Howard in 1998.
