In October 2020, when Paul discovered that his credit card had been used fraudulently, he contacted his credit card provider to dispute the transactions. Paul had some difficulty completing the disputed transaction form, but the provider eventually received it in December. At around the same time, the provider issued Paul a new card and PIN. Paul said that the provider told him that he could not use the new card to make purchases and that he should not make any payments into his account until they had sorted out the disputed transactions.
In March 2021 Paul’s former partner visited their son at Paul’s home. After Paul’s former partner left, he could not find his wallet but when he later walked down the road he found his wallet, discarded and empty. Paul cancelled his cards, except for the credit card because he believed it could not be used while the provider was investigating the fraudulent transactions.
The theft reminded Paul that he still did not know the outcome of the fraudulent transaction investigation, so he contacted his provider. Paul did not tell the provider that his card had been stolen and did not ask for a replacement card.
The provider realised they had overlooked the disputed transaction claim and apologised to Paul. Because of the delayed investigation, the provider immediately refunded all the disputed transactions from October 2020, about $2,000.
In May 2021 Paul contacted FSCL complaining about the delayed investigation into the fraudulent transactions and said that the stolen money had not been refunded to his account.
We referred Paul’s complaint to the provider’s internal complaints process. The provider responded with a copy of Paul’s account statement, showing the refund had been paid and said the debt on Paul’s card comprised:
- the existing balance in October 2020, before the fraudulent withdrawals
- interest that had accrued since October 2020, because Paul had not made any payments
- transactions made in May 2021.
Paul agreed that he was obliged to pay the October 2020 balance, of about $1,900, but said he should not have to pay the interest because the provider told him not to make the payments while they investigated. The May 2021 payments were also disputed, because Paul believed they had been made by his former -partner after the card was stolen in March 2021. Paul also said that his financial situation had changed, and he could no longer afford the minimum monthly payments.
Paul also wanted the provider to re-issue his card. The provider said they were concerned that Paul’s financial situation had changed and wanted to re-assess whether he could afford the $4,000 credit balance.
When Paul and the provider could not agree, Paul asked FSCL to help.
The provider said they had already refunded all the October 2020 disputed transactions but offered to return the balance of Paul’s card to the $1,900 that was owing before the October 2020 disputed transactions, effectively wiping the interest that had accrued. The provider asked Paul to suggest an amount that he could afford to repay the $1,900 balance, and Paul said $12 a week. The provider asked if Paul could increase this to $15, and Paul agreed.
However, the provider was not prepared to reissue Paul’s card without him first speaking to their credit assessment team. The provider explained that now that they knew Paul was struggling financially, as a responsible lender, they needed to be sure he could afford the $4,000 credit limit.
Paul said he had no intention of using the full $4,000 and that he could manage his money. Paul refused to speak to the credit assessment team.
We told Paul that the lender had been very reasonable. The provider had refunded the full amount of the disputed transactions without Paul having to provide any proof. The lender also wiped all the interest charged between October and May even though there was no record in their diary notes of telling Paul that he did not need to make any payments and could not use his card.
We explained to Paul thatnow that the provider knew his financial circumstances had changed, they needed to know he could afford his credit balance even if he did not intend to use it. We said the provider was entitled to decline to re-issue Paul’s card until the credit assessment was complete.
Paul accepted our explanation and accepted the provider’s offer to reduce the credit balance to the original $1,900 owing in October and the $15 weekly payments to clear that debt.
Insights for consumers
Lenders must comply with their responsible lending obligations. The penalties for lending to a consumer who cannot afford to repay the debt are considerable. If your lender believes your financial circumstances have changed, they are entitled to ask you for information to check that your lending arrangements are still affordable for you. This information might also help the lender assess whether hardship relief is appropriate. We encourage consumers to co-operate with lenders.