After being postponed last year due to the Corona crisis - the reduction of credit card frames at Bank Leumi and Bank Hapoalim, which was required in accordance with the implementation of the Strom Law, has been launched in recent days. Many customers of the big banks recently received messages from the banks.
For example, in one of the letters that reached us it was written: "We have noticed that in recent months you have not used the full credit limit on your card. In light of this, as of January 1, 2023, the credit card limit ending in XXXX will be updated according to your previous uses.
Accordingly, the amount of the credit limit on your card, which as of the date of this notice is NIS 20,000, will be reduced to NIS 7,500. They should sell their credit companies, and reduce the frames of customers with a frame higher than NIS 5,000 by 50%. This is in order to encourage the entry of new competitors into the credit market.
"problematic situation"
The reduction of the frameworks imposed on the two banks began already two years ago.
We are now entering the third year of the cut, for hundreds of thousands more customers.
To date, frames in the system have been reduced to more than a million customers, who are still suffering from the reduction.
Those who do not usually read messages from the bank, and whose expenses have increased abnormally, may find themselves in a problematic situation.
We have received reports of customers stuck abroad when the card does not go through and the bank in Israel is closed, of elderly people who are unable to pay at the supermarket, and more.
But apparently - the story will not end here.
According to the new regulations of the Ministry of Finance, published this week and submitted to the finance committee for approval, the definition of a "large scale bank" will be changed from 20% market share to 10%.
Time to switch to cash, photo: Reuters
In other words, Mizrahi and Discount Banks will also have to cut their customers' credit limits in the future, to the extent of 45% compared to the 2015 limits. It is not impossible that in the future, the obligation to cut bank credit will extend to about 90% of the banking system in Israel.
In Leumi and the Hapoelim already say that the reduction of the credit frameworks increases the number of rejected card transactions, makes it difficult to manage the day-to-day management of the household, and may even affect the credit rating.
Also, some customers find it difficult to find a suitable alternative - the non-bank credit companies often charge significantly higher interest rates than those of the bank cards, and there are also those who refuse to receive credit.
The Bank of Israel stated: "At this point, the Treasury has issued draft regulations for public comments, and we are examining its significance also in terms of the impact on customers."
According to Meir Vider, CEO of Vider Mortgages, "the obligation to reduce the credit frameworks has already begun and is already showing its signs in the various banks.
This extreme step may harm many households as soon as the credit limit is filled and we will probably see maximum utilization of credit limits in preparation for the next charges, which may lead to a lowering of the credit rating of households."
MK Uri Makalev, photo: Dodi Vaaknin
MK Uri Maklev told "Israel Today" that "although competition is a healthy thing for the economy, but in this game the small consumers were hurt, we saw that last year.
Households could not pay when the price index rose and the cost of living rose.
These are the people with the lowest incomes, a household that earns a minimum wage will not receive a credit line with the wages they earn."
"What is the feeling of the consumer who chose clothing in the store, wants to purchase medicine in a pharmacy or comes with two carts full of products to the consumer cash register and the cashier tells him that the card is blocked? Facing a broken trough in 2022 is like standing in front of the cashier in the supermarket and having your card blocked. Beyond shame is pushing consumers to take loans that those businesses provide."
In a discussion held a year ago at the initiative of MK Uri Makalev, the Economic Committee called on the Ministry of Finance not to approve this decree and to postpone it for a year, the committee even determined the reduction of the cancellation of the frameworks to a threshold of fifty percent when it does not fall below the sum of 7,000 shekels.
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