Commonwealth Bank has been fined A$150,000 after it increased the credit limit of a problem gambler who had informed the bank of his problem and said he did not want a credit limit increase until his gambling was under control.
The Federal Court found that the bank had breached the National Consumer Credit Protection Act’s responsible lending provisions, although more through a one-off failure than a deliberate or systemic act.
David Harris was working as a roofer when, in 2014, he got his first credit card from CBA with a $10,000 credit limit. He was earning $70,000 a year. He will be familiar to many for his evidence at the Hayne Royal commission.
Harris’s problem gambling started in 2015. He began transferring cash advances from his credit card to his CBA transaction account to pay for his bets.
That year he obtained two more credit cards from CBA, with limits of $8000 and $7000. In November the bank offered him a limit increase to $12,100 on his original card, taking his total exposure to $27,100. The following year Harris consolidated the three accounts.
In October 2016, Harris was informed during a phone conversation with a CBA staff member, while dealing with another matter, that he was conditionally approved for a further credit increase.
In response, he said he was using his credit card to fund gambling expenses, that he considered himself a problem gambler and that he wished to stop being a problem gambler before accepting any more credit limit increases.
The court took this to be a problem gambler notification and found that the bank did not formally record the notification or put it into its credit decisions system.
A little over a week later Harris got a letter from the bank offering to increase his credit limit to $32,100. Two months later he was offered a limit increase to $35,100. Harris took up the offer in early 2017.
At no stage did the bank take the problem gambler notification into account.
Between April 2015 and January 2017 Harris spent more than $270,000 on his CBA transaction account and credit cards, most of which was gambling expenditure.
From April 2017 his spending on gambling increased dramatically and he started to fall behind with payments. In August he got a call from a staff member to ask him why he was not making payments.
At that point he made a complaint, with reference to his problem gambler notification.
The bank admitted the contraventions, acknowledging that the increased credit limit was unsuitable for Harris at the time of his credit assessment.
The bank failed to make reasonable inquiries of Harris’s requirements and objectives. It did not inquire as to whether he still considered himself a problem gambler or take steps to verify whether he was still using his credit card to pay for gambling expenses.
While the court found that CBA’s contravention was not deliberate or systemic, it said it pointed to an absence of proper systems.
“CBA had procedures in place that were intended to ensure compliance with its responsible lending obligations under the NCCP Act but these procedures did not make formal provision for responses to problem gambler notifications,” it said.
The court acknowledged that CBA had taken corrective measures, including reducing Harris’s debt and putting a repayment agreement in place for the balance.
More generally, the bank has put measures in place to address problem gambling.
Since July 2018, credit providers have been prevented from making unsolicited offers of credit limit increases.