Ombudsman urges loan caution
A 60-year-old pensioner living
in government housing without assets or income has been allowed to run
up a card debt of A$74,000.
The disability pensioner, who had not worked in several years, turned to a financial counsellor to discuss the debt problem before the case was referred to the ombudsman.
The financial institution that issued the card denied it had inadequately checked the pensioner's ability to repay the debt, but later agreed to reduce the debt from $74,000 to $5000 and accept interest-free payments of $50 a fortnight.
The case was one of the worst revealed in the ombudsman's 2003-2004 annual report into banking and financial services, which listed consumer finance as the main source of complaints (28.3 per cent) for the fourth year running. Home loans (22.7 per cent) and payment systems (18.2 per cent) filled out the top three areas of most complaint.
Launching the report yesterday, ombudsman Colin Neave said the case illustrated a need for more responsible lending. He said banks needed to make sure vulnerable consumers understood the implications of credit and borrowed within their limits.
Australian Consumers Association finance policy officer Catherine Wolthuizen said banks should update emplacement and financial records of customers before offering more credit.
"People suffer in silence, and are bailed out by their families, or end up in more dire financial circumstances over debts they should never have been given in the first place," she said.
The number of new complaints in 2003-2004 fell by more than 15 per cent to 5859, a result Mr. Neave said, that reflected the banks' ability to better handle disputes internally.
More than 90 per cent of complaints were referred to the relevant bank and resolved without further investigation.