The government plans to tighten responsible lending obligations applying to credit card issuers to ensure they assess suitability based on a consumer's ability to repay the entire credit limit within a reasonable period.Treasurer Scott Morrison announced on Friday that the government had considered the recommendations of the Senate Economics References Committee report on the credit card market and produced a set of reforms, which have been set out in a consultation paper.In addition to changes to the responsible lending rules, the government will prohibit card issuers from making unsolicited credit limit increase offers, including the ability to seek prior consent. The National Consumer Credit protection Act was amended in 2011 to prohibit unsolicited written offers to increase credit limits, unless there was prior consent.According to the consultation paper, card issuers have got around this ban by making offers over the phone or online. The new prohibition would cover all forms of communication and remove the issuer's ability to seek prior consent.Issuers will be prohibited from backdating interest charges and charging interest on the portion of the balance that has been paid off. Currently, if the interest-free period is forfeited interest will be charged from the date of the purchases on the full purchase cost, even though there was a partial payment by the end of the statement period.Issuers will have to provide consumers with online options to initiate a card cancellation or reduce their credit limit.The government is proposing a second round of reforms that will be subject to consumer testing before being implemented.These include a requirement that issuers provide information on the annual cost of credit card use and a prominent display of annual fees.Issuers will be required to disclose a card's interest rate and annual fee in advertising and marketing material.Issuers will have to provide information about potential savings from switching to lower-cost alternatives.They will have to give consumers timely electronic notification that introductory offer periods are expiring.And they will have to provide consumers with alternative payment tools, such as repayment plans over a selected period of time, and contact consumers who persistently make small payments.The big issue is the change to the responsible lending rules. According to the consultation paper, card issuers typically make an assessment of the borrower's ability to meet minimum required repayments on the credit limit - typically two per cent of the outstanding balance.The government proposes to amend the responsible lending obligations to prescribe that a credit card contract would be unsuitable if it was likely that the consumer would be unable to repay the entire credit limit within a reasonable period. In the UK that period is set at three years.The Australian Securities and Investments Commission recommended such a change in its submission to the Senate inquiry. ASIC's view was that high interest rates on cards are not the cause of hardship. Rather, it is the fact that "some consumers over-borrow and under-pay large amounts of credit card debt (to which the high interest is applied)."ASIC said: "Some people begin with the