The Banking Ombudsman investigated a complaint from a bank’s customer over increased credit limits on her credit card.  The customer had approached the bank seeking an increased credit limit because she was having trouble with her finances.  The bank declined to increase the limit. 

Sometime later the bank increased the limit without any request from the customer and did so again some time later.  The customer used the increased limit, but still found she could not afford to pay back the bank.

The Code of Banking Practice provides that a bank should only provide increased credit if it holds information that leads it to believe that the customer can afford the increased lending.  As the bank knew that the customer could not afford the increased lending (it had turned down her own request for an increase) it was in breach of the code.  The bank agreed to reduce her debt to the level of her credit before the two increases and to charge no further interest or fees and to accept a $40 weekly repayment until the debt was repaid in full.

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Alan Knowsley