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Making minimum refunds on credit cards can be a very costly mistake, as one 95-year-old found out, but credit card companies have a duty to act fairly and ethically and check whether their cards are still suitable for individual clients.
An unidentified credit card provider was told that “fair” prevailed over “legal” in the case of an elderly woman who paid $ 14,500 to pay off a $ 5,000 debt and still owed $ 1,500.
The huge interest bill paid by the 95-year-old man was revealed by Financial Services Complaints Limited (FSCL), one of four official complaint services out there to hear complaints from the public about the behavior of financial services companies.
He was approached by the elderly woman’s daughter who discovered that her mother, nicknamed “Pam” by the FSCL investigation, owed $ 5,000 in 2014 and, despite having made the minimum payments from the card company, had not yet paid the debt.
Susan Taylor, FSCL CEO, said the credit card company had an obligation to treat its customers fairly and ethically, both under the terms and conditions of being a member of FSCL and because it was now a general expectation of the companies. financial services companies.
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“We wrote to the credit card provider notifying them that, from a legal perspective, you may be entitled to recover Pam’s debt, but expressing our concern that an essentially dormant account had been allowed to continue without the credit card provider. credit verified that the product was still appropriate for Pam.
“With the good culture and conduct of the industry in mind, we ask the credit card provider to pay off the balance due,” said Taylor.
He agreed.
The old woman’s daughter felt that the credit card company should have contacted her mother to verify that the card was still suitable for her, rather than leaving her to pay such a large amount of interest.
Her mother had been paying the minimum balance due every month and hadn’t thought much more about it, the woman told FSCL, and her daughter only found out when her father died, and was asked to help her review her affairs. financial
The credit card provider offered to consider a financial hardship application, which could “freeze” the debt until it was paid, but the woman felt her mother had paid enough and wanted the debt canceled.
Jin Cowan / Waikato Times
Susan Taylor, CEO of Financial Services Complaints Limited, says that fairness and ethical conduct are now expectations of financial services companies.
The woman complained when the credit card provider did not respond to this request.
Taylor said: “We were pleased to see a credit card provider doing the ‘right thing’ for their customer. If you see something that doesn’t seem fair to you, it’s worth making a complaint.
“We also remind participants of their obligation to treat their clients fairly and ethically. As customer needs can change over time, we encourage participants to check that their products are still suitable for the particular customer. “
FSCL does not reveal the names of the companies reported. Most banks and credit card providers belong to the Banking Ombudsman scheme, but FSCL has some high-profile credit card companies, including American Express, Mastercard, and Flexi Cards (Q Card).
The case is reminiscent of one revealed by ANZ bank, which last year began to be more proactive in identifying customers who were paying too much interest.
ANZ’s interim CEO says the bank had launched customer suitability checks, which found that an elderly couple working with ANZ had credit card debt of $ 80,000 and was paying $ 18,000 a year in interest, when they had $ 200,000 in a deposit account.
In a speech on good banking behavior, ANZ CEO Antonia Watson used as an example an elderly couple who had $ 200,000 in a savings account and $ 80,000 of credit card debt, so the bank He reached out to them to discuss options for repaying the debt.
“We save them $ 18,000 a year in interest costs,” he said.
