A bank has paid out more than $10k in compensation to a woman after it increased her credit card limit to nearly $25k despite her being on ACC and earning only $27k a year.
The woman initially had a credit card limit of $9500 but was offered a pre-approved increase to $14k in September 2015 and a further pre-approved increase in 2016 to $24,500.
"Ellen" and her partner "Logan" complained to the Banking Ombudsman after their home loan application was declined and they believed it was due to the woman's poor credit history.
The couple said Ellen had asked their bank to stop their bank accounts from overdrawing beyond their limits and complained their bank's app showed incorrect information about what funds were available in their account which meant they thought they had more money available than they did.
While Logan said they were also misled into believing their bank had pre-approved a home loan leading them to spend money on a builder's report which was part of a signed contract.
They then had to withdraw their offer which meant they missed out on their dream house.
The Banking Ombudsman service found the couple's bank had breached its responsible lending obligations by increasing Ellen's limit without assessing whether she could afford it.
She had to use a third of her income to meet the minimum monthly repayments.
Banking Ombudsman Nicola Sladden said too much credit card debt could lead to financial stress and hardship.
"Banks are required to check whether credit limit increases are affordable for customers, and in this case, it did not make the right enquiries.
"We found the bank was in breach of its responsible lending obligations."
The bank reimbursed Ellen $9000 in fees, interest and credit card insurance and $2000 compensation for inconvenience.
But the ombudsman also found that while the bank's money app did contain some confusing information the balances were correct.
It also found no information which showed the bank had misled the couple into thinking that had pre-approved finance to get a home loan.
It found the bank had turned down the application because the couple had a high loan to value ratio and outstanding debts, not just because of the woman's credit history.
Logan also complained about the bank not supplying him with bank statements which he needed for a court case resulting in him having to settle the case for a lower sum than claimed.
The Banking Ombudsman found the bank had an obligation to give the man the statements and should have given them to him when asked.
It ordered the bank to pay the man $1000 in compensation.
The case was just one of 700 complaints to go to the ombudsman in the last year relating to credit cards. Altogether banks received 8000 complaints about credit cards in the last year but only those that cannot be resolved go to the ombudsman service.
Sladden said the case highlighted the need for people to speak up if they needed extra help, or if they were are in a vulnerable situation.
"Banks are required to communicate clearly and effectively, to treat customers fairly, and to provide extra support to those who need it."
"While banks are working hard to improve customer care, particularly for those experiencing vulnerabilities, some customers can fall through the cracks."