In 2015 Patrick borrowed $11,000 to repay an overdraft. Over the next eight years, Patrick topped up the loan 10 times, with the most recent top-up being $10,000 in May 2023 for house renovations. In November 2023 Patrick was made redundant, and in February 2024 he asked his lender for hardship relief as he was struggling to make his loan payments. The lender accepted Patrick’s hardship application and agreed to defer his loan payments until 3 June 2024.
In April 2024 Patrick went to a financial mentor for help because he was still struggling financially. Patrick told his financial mentor that he had a problem with gambling. The financial mentor looked at the May 2023 loan top-up and asked the lender for their affordability assessment.
On the face of it, the loan was affordable. However, the bank statements that Patrick had given the lender when he applied for the loan in May 2023 showed Patrick had used his credit card exclusively for Google Pay purchases. In three months, Patrick had made 85 transactions totalling about $2,500 and had also paid about $2,500 into his credit card account. The financial mentor said the May 2023 loan was facilitating Patrick’s problem gambling and was concerned that the lender had not met their responsible lending obligations.
The lender disagreed, and the financial mentor complained to FSCL on Patrick’s behalf.
Dispute
The lender’s recorded that the first five loan top-ups were either to repay overdrafts or for debt consolidation. However, the more recent loan top-ups were for holidays or house renovations. The lender also had information that in 2021 Patrick had 10 credit cards. The financial mentor said that these were red flags that should have signalled to the lender that Patrick was experiencing financial difficulty caused by his gambling.
The lender disagreed, saying they were unaware of Patrick’s gambling and that in the two years before the 2023 lending Patrick had not missed a payment. By the time of the 2023 lending Patrick had one credit card and had fully repaid his home loan. The lender had assessed Patrick’s ability to pay the loan payments and the loan affordability and had established that he had a monthly surplus of $1,800 after the loan repayments were made.
Review
We would have been concerned that the lender had not meet their responsible lending obligations if Patrick had 10 credit cards in 2023 and had been consistently topping up the loan to refinance debt. However, at the time of the 2023 lending, Patrick presented as a borrower in control of his finances. There was nothing in the information available to the lender in 2023 to indicate problem gambling. It was our view that Patrick was entitled to make his own choice about how he would spend his discretionary income and that his spending habits at the time the loan was approved did not indicate problem gambling.
Resolution
We were satisfied that in 2023 the lender had met their responsible lending obligations, and it was when Patrick was made redundant that his financial difficulties started. We did not uphold Patrick’s complaint.
Insights for consumers
A lender can only assess borrowing based on the information available to them at the time. If a borrower sanitises information, and there is nothing in the information available to the lender to indicate they do not have the full picture, it is not fair to say that the lender has breached their responsible lending obligations.
