Offers To Lift Credit Card Limits Drives Complaints

Sydney Morning Herald

Saturday May 28, 2005

Matt Wade

ANZ has called for a crackdown on "predatory lenders" amid figures from the banking watchdog showing a sharp increase in disputes over credit cards.

ANZ told a Senate inquiry into household debt that better restrictions were needed on aggressive lenders, which are generally smaller non-bank lenders, to protect vulnerable borrowers.

But the Banking and Financial Services Ombudsman report to the same inquiry says disputes over credit card lending have soared in the past four years.

A main cause of the surge in card-related disputes was claims that lenders inappropriately offered credit card limit increases. "In some cases, the increase in the limit results in a debt the customer cannot afford to repay," the Ombudsman's report said.

Major banks issue most credit cards. In 2000 card disputes were a quarter of the "maladministration in lending disputes". This had grown to two-thirds by the end of last year, the report said. While credit card-related disputes increased five-fold in that time, disputes over home loans considered by the Ombudsman, Colin Neave, did not increase.

The submission said lenders had targeted customers with unsolicited offers on the basis of their card use. But it said this "does not necessarily indicate that the customer is able to service the debt".

The Ombudsman said unsolicited credit limit increase offers were adding to rising household debt. ANZ said in its submission that rising household debt should not trigger broad restrictions on bank lending. But it proposed "more effective restriction" on so-called predatory lenders. It also said safer borrowing alternatives should be available to those who had trouble getting credit.

An ANZ spokesman, Paul Edwards, said yesterday some low-income families were excluded from mainstream financial services and had to use unscrupulous lenders. "This area has been allowed to grow without regulation and has caused further disadvantage."

© 2005 Sydney Morning Herald

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