Was the bank's lending unaffordable

Concerns about lending decisions,
Regina has a bank-issued credit card. She complained to us that her bank irresponsibly allowed her to borrow in excess of her credit limit by 20% and that she hadn’t agreed to such an extension. Regina accrued interest and charges on her card and wanted the bank to waive repayment of the overspent amount and all fees and charges associated with it before she would agree to a repayment arrangement. Regina understood some credit cards allow customers to go over credit limits to a certain extent but she thought the extent she was allowed over the limit was negligent.
July 2015

It’s standard industry practice to sometimes allow customers to exceed credit limits to ensure they aren’t embarrassed or inconvenienced by transactions being declined. However in Regina’s case, we were concerned the bank had lent to her when she wasn’t in a position to meet repayment obligations, based on her income and expenses at the time.

The bank then made a goodwill offer but wouldn’t agree to reimburse Regina for the overspent amount because she had benefitted from the transactions she made. However, it did agree to reverse interest and fees charged since she first exceeded her credit limit and to enter into a suitable interest-free repayment arrangement. This offer was conditional on Regina surrendering her credit card. We advised this was a reasonable offer, which Regina then accepted and the file was closed.

Where a complaint about irresponsible or unaffordable lending is upheld our usual approach is:

  • the customer is responsible for repaying the amount they borrowed (on the basis they received the benefit of the transaction)
  • the bank should bear the cost of the borrowing and write off some or all of the interest and charges associated with the lending
  • an affordable repayment arrangement should then be agreed upon for the residual debt.

For more information see our quick guides on concerns about lending decisions, how credit law changes affect banking and hardship and financial difficulty.

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