The new draft legislation includes a number of reforms to existing laws, which will ban credit providers from offering “unsolicited credit limit increases”, make responsible lending obligations tougher, simplify the way interest charges are calculated, and allow credit card users to lower their credit limit or cancel their contracts.

“The purpose of the amendments is to reduce the likelihood of consumers being granted excessive credit limits, to align the way interest is charged with consumers’ reasonable expectations and to make it easier for consumers to terminate a credit card or reduce a credit limit,” the draft said.

Treasurer Scott Morrison said the new legislation will “protect vulnerable Australians from predatory behaviour” and improve credit card customer outcomes.

“The reforms will help ensure that consumers can manage their credit card debts and help prevent the debt cycle that many Australians find themselves in,” he said.

“In addition it will prohibit the overly complex and unfair way in which interest is calculated on many credit cards.”