The Finance Brokers Association of Australia (FBAA) has welcomed calls for greater scrutiny into banks' credit card interest rates.

“I applaud the Australian Prudential Regulation Authority’s (APRA) move this week to stand in line with key officials, including Treasury, the Reserve Bank and even the Australian Securities and Investments Commission (ASIC),” says FBAA CEO, Peter White. “They all want to see something done.”

The FBAA first called for an investigation into credit card interest rates four years ago when it made a submission to Senate to hold a banking inquiry.

“Reserve Bank officials have finally been called into account by the Senate about the disparity between the official cash rate of 2% and credit card rates, which average 18%, with some as high as 24%,” a statement from FBAA said.

It’s a key issue for customers according to White.

“The customer hears the Reserve Bank slashing rates but are confused as to why credit card rates stay at extraordinary high levels, not to mention some are paying an annual fee for the privilege,” he says.

White is calling for more transparency from the big banks, which he says account for more than half of the credit card market, and to “explain this clear price gouging”.

“Surely with official rates so low, there must be some room to pass on these cuts to credit card rates,” White says.

The Australian highlighted a Four Pillars report that estimates ANZ, CBA, NAB and Westpac collectively earned $920 million from credit cards in 2012-13, with the majors’ average profit margin edging to 10% in the time, up from less than 7% in 2007-08. One analyst estimated banks’ margin on credit cards to now be up to 16%.

“This is a very profitable arm of the banks but we must ensure a competitive environment remains and consumers are not getting ripped off,” White says.

The FBAA is standing behind the mounting calls for banks to lower exorbitant credit card interest rates, and welcomes the Federal Government probe into why credit card interest rates remain alarmingly high despite an historically low cash rate.

Four years after the FBAA first made a submission to the Senate about an inquiry into card rates, APRA has finally backed the call for the banks to scrutinised.

FBAA CEO Peter White says it’s better late than never that the regulator has weighed into the debate, which now sees the current spread between official cash rates and rates charged on credit cards at record levels.

“The FBAA first made submissions to the Senate in 2011 and have since mounted an ongoing campaign. Now with cash rates at 2% and credit card rates hovering around 18%, it’s time to act.

“I applaud APRA’s move this week to stand in line with key officials, including Treasury, the Reserve Bank and even the Australian Securities and Investments Commission. They all want to see something done.”

White says it’s an obvious question that gets asked when his members sit down to talk with a client, who are constantly hearing about the Reserve Bank slashing rates to record lows.

“Here’s food for thought. Had the average credit card rate fallen in line with the RBA’s cuts, our collective interest bill would be 900 million dollars a year lower.”