Stricter credit assessment

Under the new national laws, banks and other lenders, which push, unwanted credit cards and increased credit limits onto people who cannot afford it, will lose their licenses.

These changes will be introduced in September by the Rudd government after the states agreed to hand over their powers to regulate credit providers.

In terms of a new proposal all credit providers will be subject to new responsible lending conduct rules, which will shift the onus of checking the credit worthiness of a borrower onto the lending institution.

One minister informed The Sunday Telegraph that before providing credit the lender will have to first insure that the borrower is capable of repaying. This is not the current practice.

The new laws are designed to stop the major banks forcing the smaller banks out of business.

The Australian Securities and Investments Commission will be responsible for the policing of the credit card market. There will be severe penalties for breach of the policies.

Loan sharks will be included in a national licensing regime for the first time. This will apply to all bank and non-bank home loans.

New protection will be afforded for the elderly, to compensate for shrinking superannuation returns hit by collapsing stock prices.

The two new laws when implemented will seek to control the present practice of margin lending, which has grown considerably.