The ABC has spoken to a police officer with
credit card limits totalling around
$150,000 — more than one-and-a-half times his annual pay.
He racked up about $65,000 in debts with different card providers — mostly
subsidiaries of the major banks — and is still trying to figure out how he
will repay them.
Even welfare recipients are receiving eye-watering limits, such as this case
that shocked Gregory Mowle.
"Someone was on a government
pension, earning a total of say $25,000 a year, but they were assessed
to have credit cards debts or credit card limits of $80,000. This is
just extraordinary."
Mr Mowle said it is commonly the major banks and big credit card providers
engaged in this behaviour, which he believes is against the law.
"When you have a debtor who has two or three credit cards with the same
provider and, even within the same provider the credit cards are totalling
$30,000 or $40,000, and they know that the debtor is on a low income or a
government pension, I mean I just
simply cannot believe that they have complied with the responsible lending
obligations," he added.
Consumer protection groups want the responsible lending laws strengthened so
that credit card limits are not assessed on whether someone can just meet
the minimum repayments — which could leave them in almost perpetual debt.
"So that lenders, before advancing a credit card or increasing a limit, must
make an assessment about whether the borrower can repay that credit within a
reasonable period," said Mr Brody.
"And we think that period should be three years at the very most."
"Use
of generic data to inquire about expenditure
In relation to a consumer’s regular
expenditure, Financial Service Providers in the industry segment offering
high volume/low value credit facilities,
such as credit cards,
have customarily relied upon generic data to assess a consumer’s living
expenses. In our view, this
data often fails to take into account:
- *
particular needs such as additional medical and pharmaceutical expenses
- *
voluntary commitments such as school fees, and
- *
additional transport costs due to remote location.
Without an assessment of individual
circumstances, Financial Service Providers' can offer a credit limit which
the consumer cannot afford.
This sometimes arises when the source of the lump sum payment to a credit
card account is a balance transfer to another provider, but the account is
not closed.
While the FOS does not endorse the
use of generic data, we may, when investigating a dispute, consider an FSP
could prudently rely upon generic data, particularly if it considered the
consumer had under-estimated their financial expenditure. Each case
would be assessed on its own merits."