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Credit card/debt – elderly customer – low income – card limit too high – breach of Code of Banking Practice
Upon the death of her elderly father (Mr D), Ms W discovered, to her dismay, that he had been allowed to incur large credit card debts with two banks. At the time Mr D’s income was limited to National Superannuation and a small private pension. When the debts escalated out of control to a total of over $40,000, and the bank started to threaten Mr D with debt recovery action, Mr D told his wife that he was in financial difficulty.
Mr and Mrs D arranged a reverse mortgage over their previously debt free house to repay both credit card debts.
A few months later Mr D died. Ms W complained to my office about the banks’ actions in allowing Mr D to have such high credit card limits in his financial position. She was sure that the stress placed on her late father as a result of the large debts beyond his ability to repay had hastened his death.
The complaints were referred to both banks.
When bank A was unable to settle the complaint, I commenced my investigation. Bank A accepted that it had increased the credit limit on Mr D’s card from time to time, based on the fact that he was paying at least the minimum monthly repayment due each month. However, payment of the minimum monthly payment on a $5,000 credit limit is an entirely different proposition to payment of the minimum monthly payment on a $10,000 or $20,000 credit limit.
Bank A accepted that it did not fully take into account Mr D’s financial situation and thus may have breached its obligations under the Code of Banking Practice, which provide that a bank may increase a credit limit only when the information available to it leads it to believe that the customer will be able to meet the terms of the credit facility.
Bank A offered to refund all interest and fees charged above the original credit limit of $10,000, amounting to a total offer of $5,300.
After further negotiation between bank A and Ms W, with the assistance of my investigator, the bank increased its offer to refund all interest charged above a credit limit of $5,000, amounting to a sum of approximately $8,345. The bank also offered to pay compensation of $2,000 to Mrs D for inconvenience, that is for the anxiety she had suffered from learning of her husband’s financial difficulties and having to arrange a mortgage over her home. Rounded up, the offer amounted to a total of $10,500. Ms W accepted the increased offer.
Bank A advised that it has since changed its credit assessment criteria to take into account repayments made in comparison to the potential new limit of a card.
Bank B was able to negotiate a satisfactory settlement directly with Ms W. The combined settlements enabled Mrs D to repay approximately half the amount owing on her mortgage.