Prime Minister John Key has joined Finance Minister Bill English in firing a warning shot about banks' business practices - this time over interest rates on credit cards.
Mr English yesterday said banks should not be trying to repeat the large profits they have made in the past, when the
taxpayer was carrying the risk for them through deposit guarantees.
Today, Mr Key told Dunedin Radio he thought banks were taking advantage of people who used credit cards with high rates of interest.
"It is very high, you can't help but feel they are taking advantage of their customers and I have made that point to them personally and directly," Mr Key said.
One of the reasons for the high interest rate was that some card holders defaulted, and banks recouped that by charging everybody a higher rate.
"But there is no way in getting away from the fact they are raising money at 6 or 7 per cent and lending it to you at 21 or 22 per cent and they don't want you to pay your credit card off in a hurry...it is a pretty lucrative business."
This week, Reserve Bank Governor Alan Bollard took the unusual step of issuing an unscheduled statement expressing concern at a recent rise in long-term wholesale interest rates.
He reminded everyone the Reserve Bank was projecting interest rates to remain at "relatively low levels for an extended period".
Mr English yesterday told journalists Dr Bollard was making his own independent commentary about interest rates and it was possible banks were reacting to the market to some extent.
"I hope they realise though, with the taxpayer guaranteeing all the deposits and guaranteeing their borrowing overseas, that they can't expect to make the same kind of margins that they made when they were taking all the risk," Mr English said.
"Now the taxpayer is taking quite a lot of the risk, and they should be expecting to make lower returns."
- NZPA
