The Commonwealth Bank has faced a monetary fine worth AU$150,000 because it was found guilty of increasing a gambling addict’s credit limit with the customer having previously informed it about his problem gambling. At the time, the gambler had also said he was unwilling to get such a credit limit increase because he could not efficiently control his gambling habits.
The Federal Court found that, with these actions, the bank had violated the responsible lending provisions of the National Consumer Credit Protection Act. Still, the court revealed that the breach was more of an incident rather than a systemic or deliberate act. As the court found, the bank failed to make reasonable inquiries of its customer’s objectives and requirements. There was not an inquiry to find out whether he considered himself a gambling addict, and the bank’s staff members did nothing to verify whether the customer was using his credit card to fund his gambling.
The affected customer of the bank, David Harris, got his first credit card from the Commonwealth Bank in 2014. The card’s limit amounted to AU$10,000, while at his job as a roofer, Mr Harris was earning AU$70,000 on an annual basis.
As found by the Federal Court, the man’s problem gambling dated back to 2015, when he started transferring cash from his credit card to the transaction account he had with the bank to pay for the bets he was placing. He got two more credit cards from the bank by the end of 2015, with limits of AU$8,000 and AU$7,000, respectively. According to evidence, in November, the Commonwealth Bank offered Mr Harris to boost his original credit card’s limit to AU$12,100. In 2016, the customer decided to consolidate the three accounts.
No Record of Problem Gambling Notification Made by the Bank
After the consolidation of the three accounts, which took his overall exposure to AU$27,100, Mr Harris had an over-the-phone conversation with a staff member of the bank, who informed him that he had received conditional approval for another credit increase. The customer explained that he was using his credit card to pay for his gambling expenses and he considered himself a gambling addict. Mr Harris also said that he wanted to tackle his problem gambling behaviour before saying yes to any more credit limit increases with the bank.
The Federal Court took this as a notification for problem gambling and found that the bank did nothing to formally record the notification or add it to its credit decision system. About a week later, the customer got a letter from the Commonwealth bank officially offering him an increase to his credit limit to AU$32,100. Only a couple of months later, he was offered another credit increase, to AU$35,100 – an offer he accepted at the beginning of 2017.
As revealed at court, the bank did not take the notification regarding the customer’s problem gambling into account at any stage of the communication with Mr Harris.
In the period from April 2015 to January 2017, the gambler spent over AU$270,000 on his transaction account and credit cards with the Commonwealth Bank. Most of the money was used to cover gambling expenditures. As of April 2017, Mr Harris’ gambling spending increased a lot and he started falling behind with the due payments, until in August he was reached by a staff member of the bank who asked him for the reason why he was not making the payments.
At that point in his communication with the bank, the customer filed a complaint referring to his problem gambling notification. The Commonwealth Bank, on the other hand, acknowledged that in Mr Harris’ case it was unsuitable to boost his credit limit at the time of his credit assessment.
The Federal Court found that the bank had actually taken measures to make things right, including reducing the customer’s debt. A repayment agreement for the balance was also unveiled. In general, the Commonwealth Bank also took measures to address gambling addiction.