Bank didn’t think about gambling problem
The Commonwealth Bank of Australia (CBA) has been fined AUD$150,000 (USD$107,580) after a Federal Court ruled that it had violated the National Credit Act for increasing a customer’s credit limit, even after that customer told the bank that he had a gambling problem. The bank also did not bother to verify the customer’s financial situation before offering the credit bump.
According to the Australian Securities & Investments Commission (ASIC) its investigation into the situation had to do with a credit limit increase on the customer’s bank-issued credit card from AUD$27,100 (USD$19,436) to AUD$35,100 (USD$25,174) on January 20, 2017. CBA offered the customer, Mr. Harris, the increase and installed it even though Mr. Harris told the bank in October 2016 that he did not want any credit limit increases until he had his gambling problem under control.
Judge makes ruling
Justice Murphy determined that CBA violated the National Credit Act in three ways when it offered and approved Mr. Harris’s credit limit increase:
- It did not ask him about his gambling issues
- It did not take “reasonable steps” to see if he was using his credit card to pay for gambling and how much he was doing so since telling the bank of his gambling problem
- It did not properly verify the customer’s financial situation
There was a fourth violation, but it was more of a catch-all that summed up everything. The bank did not take all of the information into account and determine that a credit increase was a bad idea for a customer who is trying to kick a gambling habit.
Credit increase caused problems
Mr. Harris did eventually accept a credit limit increase and ended up running up a balance of AUD$35,706.91 (USD$25,609). He was unable to make the minimum payment of AUD$699 (USD$501).
He did try to pay off the balance by working additional hours six to seven days a week as a roofer. He depended on his gambling winnings, though, and even took a loan from his employer.
Because of his debt, Mr. Harris suffered from depression, couldn’t sleep, and was physically and mentally exhausted. He said two of the problems with addiction are the difficulty in admitting he had a problem and difficulty in asking for help.
“….in the phone call with Commonwealth, I tried to do both,” he said. “I tried to reach out for help and I didn’t get any. I got the opposite.”
Justice Murphy provided an example of how pernicious the credit increase and subsequent debt was for Mr. Harris, saying, “If he incurred no additional charges on his credit card and each month he paid only the minimum repayment it would have taken him 137 years and 10 months to pay off the balance.”
According to the ASIC report, CBA admitted that its violations were a result of poor processes when handling problem gambling notifications from customers. The bank has taken steps to fix these problems, as well as work on other initiatives to help customers manage their spending. It has also entered into a “hardship arrangement” with Mr. Harris.