The Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry[1] will no doubt have many case studies referred to it pointing to current practices that appear to be unethical, display poor judgement on the part of the ‘offering institutions’ and other instances of poor lending and supervisory practice.
One of the most complained about practices by financial counsellors and others is the unsolicited offer of credit by banks and other industry players including lines of credit, credit card products or opportunities to increase credit limits. The issue of credit cards, debt issues and payment arrears arising from credit cards is the number one reason for clients seeking the help of financial counsellors.
There have been recent reports of credit facilities being offered to problem gamblers or known gamblers where it might have reasonably have been expected that the bank would have conducted my rigourous credit reference checks and/or observed expenditure stream of the individual where the individuals has maintained a saving account with the same bank (e.g. relevant checking or positive information would be has the person paid off a loan or consistently met account repayments).
The South Australia Centre for Economic Studies examined the issue of problem gamblers and their access to funds with which to gamble in a report “Problem gamblers and the role of the financial sector, Occasional Paper No.33 for the then named Department of Families, Housing, Community Services and Indigenous Affairs (FaCHSIA)
In the conduct of that research financial institutions pointed to what they considered privacy issues which legally prevented them from acting on identified withdrawal patterns except where they are alerted to potential cases of money laundering or counter terrorism. However, there would appear to be no reason why a query could not be amended to a bank statement that identified a pattern or certain frequency of withdrawals to say an on-line bookmaker or sports betting agency located in the Northern Territory. Recent events including TABCORP’s failure to report transactions of a certain amount to AUSTRAC and allegations the CBA had failed to report suspicious transaction as well suggest that banks need to do more to protect customers and to meet legal compliance requirements.
In the SACES report, financial institutions recommended:
- “more comprehensive credit reporting including negative information on an individual’s credit history” should be available; and
- Institutions “should avoid offering line of credit and credit card products if the person applying seems to have problems managing their finances. Instead it would be preferable to offer loans on principal plus interest basis.”
Noteworthy is that financial institutions did not recommend they cease unsolicited offers to increase credit card limits, lines of credit or the offer of credit cards. Perhaps that time has come!
Associate Professor Michael O’Neil
[1] Should banks offer credit to problem gamblers? Royal Commission urged to investigate, http://www.abc.net.au/news 2018-02-11/royal-commision-to-consider-banks-role