Rika received a LinkedIn message from John, who claimed to be the owner of an American based construction company. John told Rika that his company was in the process of finalising a tender to build a mall in Tokyo and asked if she was interested in a position on their administration team. John said that the position was part-time and explained that everything would be done via phone or email.
John further told Rika that they were working with their investors and would be able to start paying her a weekly salary once the build started.
Rika was excited about the new opportunity and the additional income, so she accepted the offer and sent John her CV, contact information, account details and a copy of her driver’s licence.
Rika started working immediately and did everything that was required of her. Because Rika and John spoke regularly, they built a close relationship, and John approached Rika when the company struggled to finalise the funds from their investors. John told Rika that they only needed $25,000 to reach the required funds and asked if she was interested in investing.
Rika told John that she would have loved to help but did not have $25,000 to invest.
A while later John suggested Rika apply for a loan of $25,000 and said that her return on investment would be ten times that much. John also agreed to pay the monthly repayments on the loan, so Rika did not have to.
Rika trusted John and applied for four credit cards with a combined credit limit of $25,000. The lender approved Rika’s applications and the cards were delivered to Rika’s home address. On receiving the cards Rika phoned the lender to activate them and sent John the card numbers, expiry dates, CVV numbers and the PINs.
A few months later the lender phoned Rika and told her that her repayments were overdue. Rika immediately phoned John and he promised to pay.
A month later the lender sent Rika a letter of demand saying that they were going to hand her account to a credit agency if she did not make payment. Rika phoned the lender and told them about her agreement with John. The lender explained that Rika was responsible for the debt and suggested she pay the arrears to avoid legal action and ask John to pay her back.
Rika was worried that she would lose her house and started making payments.
By the time Rika paid back $18,500, she was in financial hardship and could not afford the monthly repayment. Rika stopped paying and complained to the lender that she had been the victim of fraud.
The lender investigated the complaint and said that Rika’s funds were not fraudulently accessed as she claimed. The lender said that Rika willingly gave John her account details and she knew John’s intention was to withdraw the full amount of $25,000. The lender suggested Rika file a complaint of fraud against John with the police.
Rika was unhappy with the lender’s response and complained to FSCL.
Dispute
Rika said that John fraudulently used the funds, without her authorisation, because the funds had not been used for the purpose agreed between them.
The lender said that
- Rika’s account was not fraudulently used, and that Rika was scammed out of her funds.
- there is a difference between being scammed and being defrauded.
- they were not able to assist where a client fell victim to a scam.
- according to their terms and conditions, Rika should have taken extra care to keep her card details private, which she did not do.
Review
After reviewing the complaint, it was clear that unfortunately, Rika had been scammed.
The difference between a scam and fraud
Rika’s trust had been betrayed by someone she thought she knew, so we wanted to make sure that Rika understood the difference between a scam and fraud, and to give her the tools to recognise the warning signs in future.
We explained to Rika that
- a claim of fraud is where the fraudster used her account without her knowledge and without her involvement, which was not the case for Rika.
- The fact that John lied to her was not enough to prove fraud, she had to prove that she had not authorised the transactions, which she could not do.
- Because Rika gave her card details to John, she was now liable for the debt and unfortunately had been scammed.
Although Rika was disappointed, she said that she still owed the lender $6,500, before fees and interest were added, and she was concerned that the repayments were unaffordable.
Irresponsible lending
We expressed our concern about the lender approving four credit cards only weeks apart. It was our view that the second, third and fourth cards should not have been approved until Rika started paying her first card.
- If a higher credit limit was affordable, why did the lender not just increase Rika’s limit on the first card?
- Why did Rika have to apply for four different cards with the same lender?
- Rika’s arrears on her first card should have been a red flag for the lender and the other cards should not have been approved.
We told the lender that the loans on the second, third and fourth cards may have amounted to irresponsible lending as set out in section 89(1)(aaa) and 94(1)(caa)(ii) of the Credit Contracts and Consumer Finance Act 2003 (CCCFA). The CCCFA stipulates that a lender is obliged to refund all interest charges, credit fees and default fees that have become or would have become payable under the agreement.
We suggested the lender reconsider their response, investigate the affordability of the loans and propose a reasonable settlement offer in line with the CCCFA.
Resolution
The lender then agreed to write off the outstanding amount of $6,500 in final settlement of Rika’s complaint. Rika was relieved with the outcome, thanked FSCL, and the complaint was closed.
Insights for consumers
Unfortunately, scams have become common and a good warning sign for spotting a scam is that, when something seems too good to be true, it probably is.
We have seen many complaints where a consumer fell victim to a scam, and they almost always communicated with the scammer via email or social media.
It is important to remember that you are responsible for the security of your account and that you should never give someone your account details without meeting them in person. You should also never give your PIN to any other person as that is a breach of the card’s conditions of use.
Any fraudulent activity on your card should be reported within 30 days.
