The Australian Securities and Investments Commission is proposing tighter guidelines on credit card lending, with a focus on consumers' repayment ability, as the country continues cleaning up the credit card market.

The regulator issued a consultation paper proposing assessments of credit card applicants to be based on the capacity to repay the credit limit within three years, according to a July 4 release.

The three-year repayment period will strike a balance between ensuring consumers reasonable access to credit cards and preventing them from being unable to repay debt, ASIC said. Consumers will still retain the flexibility to make low minimum repayments on credit cards.

The new guidelines will apply to providers of credit or credit assistance to both new and existing credit card contracts from Jan. 1, 2019.

ASIC added that, in June, 18.5% of consumers were struggling with credit card debt, with some missing payments, carrying heft debts or repeatedly repaying in small amounts.

The proposed guidelines came after Australia & New Zealand Banking Group Ltd. and Westpac Banking Corp. said in February they would refund customers more than A$20 million in total for, respectively, failing to properly disclose credit card product details and increasing credit card limits to customers in financial hardship.

Following a review of credit card lending by ASIC in 2014, the Australian government has since introduced reforms requiring, among other things, credit card providers to gauge whether a credit card limit might be unsuitable based on the holder's ability to repay within a certain time the proposed limit, and not the minimum repayment amount.

The consultation will close July 31.