- »CBA Cited for Ignoring Problem Gambling Standards
CBA Cited for Ignoring Problem Gambling Standards
It has become a trend in 2019 and 2020 for financial institutions, especially those in Australia, to address problem gambling. Banks have done everything from limiting cash advances to establishing self-exclusion mechanisms regarding gambling transactions.
Commonwealth Bank of Australia has those in place as well. The problem was that the institution violated its own policies. And the Australian Securities and Investments Commission issued a sizeable fine for doing so.
David Harris, Problem Gambler
The story at the center of the violation is one of a person with a gambling problem and a credit card issued by the Commonwealth Bank of Australia (CBA). His name is David Harris, a roofer by trade.
When Mr. Harris opened a credit card with CBA in 2014, he was a roofer making approximately $70,000 per year. The bank issued a credit card with a $10,000 limit.
In April or May 2015, however, Mr. Harris began to gamble “beyond his means.” He used cash advances and credit card transactions to pay for gambling, often running up his card balance to the limit. He made payments in large sums, presumably with gambling winnings. He then obtained two additional CBA credit cards, one with a $7,000 limit and the other with an $8,000 limit. Later in 2015, CBA asked Harris if he would like his initial card’s limit increased to $12,100.
Altogether, he consolidated his three cards into one with a $27,100 limit.
In October 2016, he asked that the bank be careful to verify his financial situation before issuing any type of credit limit increase on his credit card. He asked for no increase until he could better control his gambling. He specifically told the bank that they should recognize that he uses the card for gambling and should not issue more credit.
Per the law, this is known as the “Problem Gambler Notification.”
While Mr. Harris asked to postpone any increase until he sorted out his gambling, CBA contacted him 10 days later to offer the new limit of $32,100. CBA admitted that it ignored his gambling statement. Little more than one month later in 2016, CBA offered to increase his limit again, that time to $35,100. Mr. Harris accepted in January 2017.
Mr. Harris then continued to use the credit card to fund his gambling for several years. He ran up a debt that he tried to pay with gambling winnings and a loan from his employer. From January 2017 through June 2017, he incurred a total of approximately $105,749 in gambling-specific expenses, pieces of which he would pay off and then charge more.
By August 2017, his balance of $35,706.91 would have taken more than 137 years to pay in minimum payments. The final tally would have then included $267,234 in interest, too.
Purported CBA Problem Gambling Help
CommBank dedicates a section of the support part of its website to problem gambling assistance.
“At CommBank, our purpose is to improve the financial wellbeing of our customers and communities. This includes those who find themselves in vulnerable circumstances. We recognize that some of our customers may require assistance in controlling their gambling spend – it’s a growing issue our community is facing. Our gambling and cash block gives you greater control over what you spend on gambling.”
Customers are welcomed to call someone specializing in such support, with a dedicated number listed for the “Community Wellbeing” team.
Some of the tools provided by the bank include:
- Financial hardship assistance
- Financial control tools
- Ability to block gambling and cash transactions on debit and credit cards
- Connections to additional support services
The caveats are that the full gambling and cash blocks are available only for credit card customers, and the online gambling block applies to debit cards only.
Breach of National Credit Act
CBA printed a good game on its website, but when it came to abiding by Mr. Harris’ wishes, the institution failed. That was the finding of the Australian Securities and Investments Commission (ASIC).
The Federal Court examined Mr. Harris’ case and found that CBA violated the responsible lending provisions of the National Consumer Credit Protection Act 2009, also known as the National Credit Act. It was established to ensure that credit providers satisfactorily inquire about a customer’s financial situation before issuing a loan or line of credit.
ASIC found that CBA failed to take reasonable steps to verify his income and other financial information – or review notes he provided about his problem – before offering and then approving the increased limit for his credit card.
Specifically, Justice Murphy ruled that CBA should have:
- Inquired about Mr. Harris’ gambling problem.
- Taken “reasonable steps” to see if Mr. Harris was using his credit card to pay for gambling expenses since he expressed concern.
- Taken “reasonable steps” to verify Mr. Harris’ financial situation.
- Seen the credit limit increase as unsuitable until he acknowledged that gambling was no longer an issue for him.
The judge also noted that CBA missed the opportunity to help Mr. Harris because of systemic inadequacies and processes.
Ruling with Consequences
The Federal Court of Australia ordered that CBA pay a pecuniary penalty of $150,000 for the violations of the NCCP Act. The court also ordered that the bank pay ASIC’s costs pertinent to the legal proceedings.
It should be noted that CBA forgave $24,090 of Mr. Harris’ credit card debt prior to the judgement.
CBA also introduced measures to address issues associated with problem gambling, broader measures that help customers to manage their expenses.
After the ruling, a spokesperson for CBA told the Australian Financial Review, “We did not do the right thing by our customer, and we again apologize to him for the personal impact this has caused.”