For example, Ellen*, who was on ACC and earned $27K per annum, was given an unaffordable credit card limit increase of $24K by her bank. Ellen had to use a third of her total income to meet the minimum monthly repayments.
“Too much credit card debt can lead to financial stress and hardship. Banks are required to check whether credit limit increases are affordable for customers, and in this case, it did not make the right enquiries. We found the bank was in breach of its responsible lending obligations.” The bank reimbursed Ellen $9,000 in fees, interest and credit card insurance, $1,000 for failing to provide statements, and $2,000 compensation for inconvenience.
In another case, Mason*, who had a gambling problem, was issued with a credit card shortly after he asked his bank to block him from any future personal loans. “In this case we found the bank breached the Code of Banking Practice by not communicating effectively,” says Ms Sladden. Mason wrote to his bank and asked if they could block his access to personal loan services due to personal circumstances. The bank responded to say his request had been noted and the home lending team notified. Three months later, Mason applied online for a credit card with a $12,500 limit, which the bank immediately approved. “There was a clear disconnect at the bank, the left hand wasn’t talking to the right. Mason should have been asked about his personal lending block when he applied for a credit card.” The bank reimbursed Mason $1,000 credit card interest and paid $500 compensation.
Ms Sladden says a gambling addiction would fit under at least one of the consumer vulnerability drivers in the recently released framework by the Council of Financial Regulators. The framework acknowledges anyone at any time can be affected by vulnerability, making them more susceptible to financial harm.
Banks are now introducing measures to help prevent the financial harm caused by gambling. Some are working with anti-gambling support groups, some have introduced opt-in credit card gambling blocks, and some are banning the use of its credit cards for gambling.
“We welcome the introduction of new responsible lending rules later this year and hope to see fewer customers falling through the cracks.”