Subsequently, Mervin experienced a change in circumstances.  He lost his job, had health problems and went over his limit by $6,000. He couldn’t repay the debt, and the bank referred it to a collection agency. 

Mervin complained that the bank should not have allowed him to exceed his overdraft limit by such a significant amount. He said this amounted to irresponsible lending, and as such he believed he should not have to pay the amount drawn over the overdraft limit. 

However, during the investigation of his complaint, Mervin went through No Asset Procedure. This meant he did not have to repay his debts, including the bank debt.

Our investigation

The bank said it was Mervin’s responsibility to monitor his bank account and that the ability to exceed his limit by a large amount had been caused by a system approval, partly related to the high income he had been receiving. The bank also said the terms and conditions of his account allowed for unarranged overdrafts.

While we accepted that it was Mervin’s responsibility to monitor his account, we considered the amount by which he was able to exceed his overdraft limit was, indeed, significant.

We recommended the bank review its system settings and unarranged overdraft policies and processes to prevent significant drawings beyond the approved overdraft limit. 

Outcome

The bank agreed to conduct such a review, which satisfied Mervin.