Mr C has a bank-issued credit card. He complained to us that his bank irresponsibly allowed him to borrow in excess of his credit limit by 20% and that he hadn’t agreed to such an extension. Mr C accrued interest and charges on his card and wanted the bank to waive repayment of the overspent amount and all fees and charges associated with it before he would agree to a repayment arrangement. Mr C understood some credit cards allow customers to go over credit limits to a certain extent but he thought the extent he was allowed over the limit was negligent.
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 Mr C’s case, we were concerned the bank had lent to him when he wasn’t in a position to meet repayment obligations, based on his income and expenses at the time.
The bank then made a goodwill offer but wouldn’t agree to reimburse Mr C for the overspent amount spent because he had benefitted from the transactions he made. However, it did agree to reverse interest and fees charged since he first exceeded his credit limit and to enter into a suitable interest-free repayment arrangement. This offer was conditional on Mr C surrendering his credit card. We advised this was a reasonable offer, which Mr C 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 he or she 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.