CBA has been ordered to pay $150,000 and ASIC’s court cases, for breaching the responsible lending provisions of the National Consumer Credit Protection Act 2009.
The bank was found to have failed to take account of a notification from a customer (Mr Harris), that he was a problem gambler and to take reasonable steps to verify his financial situation before offering and approving a credit card limit increase.
ASIC had investigated the incident, finding CBA had providing a credit limit increase to Mr Harris on 20 January 2017, raising the credit limit on his card from $27,100 to $35,100.
CBA offered and then made the credit limit increase despite Mr Harris informing the bank in October 2016 that he was a problem gambler and did not wish to increase his credit limit until he was able to get his gambling under control.
In the his latest decision made last Friday, Justice Murphy declared that CBA contravened the National Credit Act prior to offering and approving Mr Harris’ credit card limit increase by failing to:
- make reasonable inquiries as to whether Mr Harris still considered himself to be a problem gambler;
- take reasonable steps to verify whether Mr Harris was still using his CBA credit card to pay for gambling expenses, and the extent to which he was doing so and had done so since he informed CBA of the problem gambling;
- take reasonable steps to verify Mr Harris’ financial situation; and
- assess the credit card limit increase as unsuitable to meet Mr Harris’ requirements or his objective to cease being a problem gambler before accepting any credit limit increase.
ASIC alleged and CBA also admitted that the misconduct was the result of inadequate systems and processes in respect of problem gambler notifications.
As recognised by Justice Bernard Murphy in his judgment, CBA has taken corrective measures to finalise a hardship arrangement with Mr Harris. It has also introduced a series of measures intended to address issues associated with problem gambling as well as other processes to assist customers to manage their credit card expenditure.
In arriving at the penalty to be imposed, the court took into account CBA’s cooperation with ASIC and admissions of contravention of the law.
CBA’s conduct with respect to credit cards and credit card limit increases was the subject of a case study by the royal commission.
Since the incident took place, the law has changed. A credit card contract or credit limit increase must be assessed as unsuitable if it is likely that the consumer would be unable to repay the credit limit within a period prescribed by ASIC, three years.
Additionally, unsolicited credit limit increase offers, like those Mr Harris received, are now prohibited.
