During a 2016 phone call to his bank about an unrelated matter, David Harris was told he was conditionally approved for an increase to his credit card limit. Even though he informed the person that he had a gambling problem, a couple of weeks later he received two letters, in quick succession, offering an increase to his limit. Within months, David had applied for, and received, a credit limit increase of $8000, the maximum offered by the bank. This took his limit to $35,100. In March 2018, David told his story as a witness to the Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry.
David’s case study* was drawn from one of 990 submissions received by the commission relating to unfair or irresponsible lending. In his final report, Commissioner Kenneth Hayne noted that the case studies chosen were illustrative of the types of issues emerging. ‘Not every complaint that was made could be publicly examined,’ he says. ‘There were too many to do that.’
It’s likely many of the untold stories represented by David’s include a financial counsellor. In Victoria, a group of financial counsellors meets regularly to exchange stories about working with clients experiencing gambling harm, including dealing with banks. The Gambling Issues Working Group is a sub-group of the Financial and Consumer Rights Council, the peak body for financial counsellors in Victoria. By sharing their insights, including with other organisations, specialists and advocates, the group aims for systemic change.
Tackling stigma in banks
Pam Mutton is a Gambler’s Help financial counsellor and member of the Gambling Issues Working Group. She sees stigma as one of the biggest issues facing people experiencing gambling harm. Many clients are reluctant to tell their family about their gambling, let alone a royal commission.
‘With alcohol, it’s “Poor Mary, her husband’s an alcoholic,”’ says Pam. ‘Whereas with gambling, it’s “Poor Mary, her husband’s a gambler. Why doesn’t she do something about it? Why doesn’t he just stop?”’
Many clients are reluctant to tell their family about their gambling, let alone a royal commission.
Financial counsellors often talk to ‘hardship’ teams in banks on behalf of clients, and a major focus of the working group is reducing the stigma they observe within some of these teams. Since the royal commission, they have noticed that certain banks have become a lot more forensic in their assessment of people who gamble. They say the questions asked and level of documentation requested are more exhaustive than for people who don’t gamble.
Gambler’s Help financial counsellor Carmel Vivian currently has a case with the Australian Financial Complaints Authority (the dispute resolution service for all financial complaints), which has been swamped since the royal commission.
‘The bank’s hardship officer knew exactly how much my client had lost in the month they lent him nearly $30,000. And she said to me that losing $1000 in a month doesn’t make a problem gambler. I was floored.’
Carmel says this is one of several cases of discrimination against her team’s clients. ‘The bank should be happy they’re getting help for gambling, but they say, “We’re glad they’re in recovery, however, we need a timeframe for when they’ll be ‘fixed’”’. Or sometimes it’s just a blunt refusal. ‘They’ve been gambling. We’re not prepared to do anything’.
‘[The bank’s hardship officer] said to me that losing $1000 in a month doesn’t make a problem gambler. I was floored.’
Gambler’s Help financial counsellor Carmel Vivian
The financial counsellors know hardship teams are under pressure and have high staff turnover. They say frequent training is needed so that, at any given time, staff are aware of gambling harm and not judgemental of people experiencing it.
But they say education is also crucial at the borrowing stage, which, for many customers, is the first step on the road to the hardship team. This is where the forensic analysis is needed.
Responsible lending can head off gambling harm
According to Gambler’s Help financial counsellor Susan Orchard, putting pressure on bank staff to sell products can impair judgement and introduce moral hazard. ‘When you’ve introduced that, you get unconscionable lending,’ says Susan. ‘And then we have to argue that with the hardship team.’
‘The banks say things like, “they show affordability”,’ says Gambler’s Help financial counsellor Cheryl Buttigieg. ‘But they’re not getting the full picture. The customer may appear to be up to date with their finances, but, underlying, they’re borrowing from family and friends, they’re behind in their mortgage, and they’re taking out more credit.’
Some banks offer customers the option to block gambling transactions on their credit cards. Others have introduced outright bans.
The royal commission emphasised the need for banks to apply the National Consumer Credit Protection Act 2009 framework for responsible lending to consumers, which includes the obligation to assess unsuitability. Customer advocacy teams, set up in all banks after the royal commission, have a role to play in ensuring the Act is applied.
A positive development since the royal commission is that some banks offer customers the option to block gambling transactions with a ‘gambling’ merchant category code on their credit cards. For certain banks, this also extends to debit cards. Others have introduced outright bans on using their branded credit cards for gambling.
Financial counsellors and their clients can help educate banks
The financial counsellors acknowledge that some banks are starting to do things well. Susan says her team was recently contacted by a customer advocacy team with concerns about a customer.
‘They said, “We’ve got you down as a reference, as someone we can talk to about this customer. We’re concerned about the contacts he’s made with the bank, to try and increase his ability to get money. We’re about to put in place some actions for him around his debt, but we want to be able to protect his income as it comes in next week. What might we do?”’ Following a discussion with Susan and her team, the bank made policy changes.
While this was a great outcome, the financial counsellors say these conversations currently depend on individual relationships with bank management. A more coordinated, industry-wide approach to culture change is required. And to address stigma, it needs to involve firsthand, face-to-face stories from customers and financial counsellors.
In giving evidence to the royal commission, David Harris said, ‘Two of the hardest things you can do when you are suffering from an addiction is, one, admit you have a problem and, two, reach out for help, and in the phone call … I tried to do both … I tried to reach out for help and I didn’t get any. I got the opposite.’
Pam Mutton, Carmel Vivian, Susan Orchard and Cheryl Buttigieg are Gambler’s Help financial counsellors at Connect Health & Community.
* David Harris’s case study was part of Financial Counselling Australia’s October 2018 submission to the Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry. See POL.9100.0001.0739 at: Interim Report submissions. Note: the automated process by which David received offers from the bank to extend his credit limit no longer operates.