Banks may be forced to stop offering unsolicited Aussie credit limit increases

Banks may not be able to offer customers unsolicited Aussie credit limit increases in the future, if draft legislation is approved.

This has not been welcomed by the financial organisations and the Herald Sun reports the banks' lobby group has revealed the scope of the proposed laws had exceeded expectations.

Australian Bankers' Association chief executive Steven Munchenberg explained  providers would not be able to "in any way" suggest to a customer that they should have an increased limit on their .

But he noted the government has gone a little too far with the legislation, adding: "The bill goes way beyond what we think is necessary, even to achieve what the government wants.

"It just seems to be another example of overkill. Even if there is an issue there, you don't need this great big sledgehammer to crack the little hazelnut."

Other proposed changes - which were announced in the federal government's draft legislation on Friday (March 4th) - would see the financial organisations having to allocate repayments to the debts carrying the highest interest rate repayments.

And the government has proposed the introduction of a buffer - whichever is lower out of $500 or ten per cent - for those who go over their credit limit.

If this is approved, it hopes to stop the banks from charging fees to people who go into the buffer.

Last month, the Commonwealth Bank (CBA) stated underlying credit growth remained subdued because of "fragile" consumer and corporate confidence.

However, the CBA's group chief executive officer Ralph Norris commented that the overall economy had started to do well, plus further advanced economies had shown signs of improving.

But its Business Sales Indicator revealed debit and credit card spend increased by 0.5 per cent in January compared to one month previous.