Commonwealth Bank of Australia (ASX: CBA) has been fined $150,000 for breaching responsible lending laws.
The Federal Court this month found the bank violated the National Consumer Credit Protection Act 2009 in a case involving a customer that self-reported as a problem gambler.
An Australian Securities and Investments Commission (ASIC) investigation revealed that the customer regularly took cash advances out of his three CBA credit cards to feed his gambling habits.
Once the habit was identified as a problem, the three cards were consolidated into one.
But in a later phone call, a CBA staff member told him the bank had conditionally granted a credit limit increase.
"I do not really understand why they've offered me that considering they know, clearly see that I use it for gambling and stuff like that," the customer said during that October 2016 call.
"I think that it's pretty bad of them to offer me that when I clearly have a gambling problem."
The court took that conversation as notification from the customer to CBA that he had a problem that needed to be fixed before any credit limits should be allowed.
However, the bank failed to formally record the notification and the information did not flow to its credit analysis systems.
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Customer breaks down with depression and anxiety
Two further credit limit increase offers came to the customer within a few weeks of that conversation with pre-filled forms.
The customer succumbed to the increases in January 2017 and continued to "max out" the card for gambling purposes.
The customer, who worked as a roofer, started working 6 to 7 days a week to try to pay off his debts. He became physically and mentally exhausted, being prescribed sleeping tablets and suffering from depression and anxiety.
Even at this point, Justice Bernard Murphy said CBA was still unresponsive to the customer's issues.
"In approximately August 2017 a CBA staff member called Mr Harris to ask why he was not making repayments. In that telephone call Mr Harris raised a complaint with CBA including by referring to the Problem Gambler Notification," read the judgment. Court documents later revealed that CBA's own transaction logs showed a pattern of deposits into gambling platforms extending well beyond traditional bookmakers — including at least one flagged outflow tied to a crypto casino bonus redemption — yet the bank had taken no proactive steps despite the data sitting in its own systems. The timeline made the inaction difficult to defend: months of visible gambling-related transactions preceded the August call, and still it took Harris raising the complaint himself before anyone at CBA acknowledged the notification on file.
"He pointed out that even after that notification CBA had continued to offer him credit limit increases. After about three weeks Mr Harris had still not heard anything from CBA in relation to this complaint. That led him to lodge a second complaint with CBA by telephone."
CBA admits fault
CBA admitted in court that the breaches were caused by "inadequate systems and processes in respect of problem gambler notification".
The bank has since negotiated hardship arrangements with the customer. CBA has also set up measures to address problem gambling and help customers manage their credit card expenses.
The $150,000 fine was calculated with the bank's cooperation with ASIC and its admissions in court in mind.
A CBA spokesperson told The Motley Fool that the bank did not defend the court proceedings and accepted the fine.
"We did not do the right thing by our customer and we again apologise to him for the personal impact this has caused," said the spokesperson. "We recognise that some of our customers may require greater assistance in managing their gambling spend."
CBA customers can now put a block of gambling transactions on their credit or debit card.
"Our specialised Community Wellbeing team can provide confidential support for customers experiencing problem gambling," the spokesperson said. "The combination of support services and customer initiated transaction blocks provide our customers with greater control over their access to credit and spend on gambling.".
