How Do Credit Limits Work? Gambler Family Member with $30k CC Limit but 30k Income

Lanon234 on 21/02/2018 - 16:26
Last edited 21/02/2018 - 16:42 by 1 other user

Just wanted to get some thoughts/ info on how credit limits work.

I have a family member who has a gambling addiction and we recently found out they have been withdrawing from a credit card which now has a balance of $30k. Thing is their annual income is only about $30,000. I then looked at past statements and the limit started at around $5000 in 2013 and its slowly grew to $30,000 today.

How do credit card limits work? They've been paying the minimum balance but I don't understand how they they could offering credit limits to be increased when they're only on about $30k pa on wages?

Financial

Comments

  • anon234 on 21/02/2018 - 20:57
    +1

    Thanks all for the responses.

    I'm definitely going to look at trying to get him a balance transfer (not sure if another bank will accept a CC application under his name) as he isn't on much salary. I'll transfer as much as I can and then pay off the rest.

    Trust me our family has gone through this chat. He was due to retire but he's agreed to continue working until this is paid for. Either making repayments to the transferred balance or to me.

    The addiction has been an ongoing issue since my teens. Except we thought it was under control (i.e he only gambled his 'pocket' money). Didn't think he would open a PO box and have this CC statements directed there. I mean he doesn't drink nor smoke. He finds gambling his 'entertainment'. He's 65, what more can you do..

    • tryagain on 21/02/2018 - 21:13
      +4

      Get the bank who gave him a CC limit of 30K to give him a debt consolidation loan for the same amount, surely if they won't give him the loan then they are admitting that they shouldn't have given him the CC limit in the first place. Having the loan in his name will not only be a good reminder of what got him there in the first place but also help to stop him being able to gain further credit again and end up in the same place all over again.

    • whooah1979 on 21/02/2018 - 21:24
      +3

      Didn't think he would open a PO box and have this CC statements directed there.

      Addicts will lie, cheat and steal for a fix. We had someone lie their way to obtaining our signature to open a cc. They maxed it out and left us with a five figure debt which we didn’t know about until years later. Karma wasn’t instant, but it did come in the form of them spending a few years in the big house.

    • Sensiekatie on 22/02/2018 - 10:53
      +1

      Do not sort it by paying any.

    • taoz on 23/02/2018 - 13:03

      Get another job to pay for I’d think. He got into the debt.
      Responsibility, I rare word it seems these days

    • ahara on 23/02/2018 - 17:43
      +1

      I would be careful rushing to the balance transfer as you are then kind of acknowledging the debt and not contesting it in any way or form.
      It would then also be with another bank that may argue differently on how the debt was generated (balance transfer) and make the whole process of reducing the debt more difficult.

      Contact someone for independent legal advice.

  • Justme1234 on 21/02/2018 - 21:33
    +15

    Contact the bank, tell them that you are the representative on the account (you’ll be asked to prove this either in writing or your dad will need to confirm it verbally) and that your father is in financial difficulty. Really stress that term so they can’t ignore it. Under the consumer credit laws, the bank is legally obligated to assist. They’ll probably close the account, but they must also consider a repayment plan that is reasonable and manageable. They may also freeze interest and charges, each bank has a different policy which they must publish on their website. You’ll need to be honest about the gambling problem to get the most assistance. If they refuse to assist, lodge a complaint with FOS, www.fos.org.au it’s free of charge and they’ll ask the bank to justify the limit increases on the account. You might also want to talk to a financial counsellor, also free and they’ll often Negotiate with the bank for you. Don’t take out any more loans and don’t pay anyone for advice. Don’t make any big decisions about next steps until you’ve explored all the free options. In this instance, consumer law is on your side.

    • Cartman2530 on 22/02/2018 - 18:16

      ^This.

      A friend of mine came into financial hardship and worked out a payment plan with the bank, without interest. However, if they missed a payment the interest would resume at the original rate.

      I would seriously exhaust all avenues before declaring bankruptcy, its an absolute last resort. Even 30K is workable if all you need is time.

  • Findo on 21/02/2018 - 21:33
    +7

    I have an addictive personality and am a recovering alcoholic. I’ve met countless people in rehab and the various anonymous groups I frequent who were addicted in some shape or form to all kinds of things and the most important thing is to not enable them. If you pay off your old man’s card debt, he will just use that freed up balance to gamble some more. It’s best to make it absolutely clear you will have no part to play in his addiction and anything he does is on him. Have you tried to seek out support groups for family members like Gam-Anon? What do your other family members think about this?

  • garetz on 21/02/2018 - 21:38

    You are better off not paying the credit card debt, if he pays 20% interest a year, at 30k, thats 6k pa, thats better than him having 30k available again to gamble it away. 6k pa is 5 years = 30k, you pay off the debt, then he propably will gamble 30k away in no time flat.

    • banana365 on 23/02/2018 - 14:11
      +1

      No, you just get the account closed so that card can't be used (the bank will close it themselves if the situation is bad enough). Once that's done, monitor his financial activities. If needs be, OP could try to argue that his dad is not capable of managing their finances and get an Enduring Power of Attorney so that any major financial activity (like agreeing to any debt/loan facility) has to get OP's approval. My wife did that for her parents when they started making stupid financial decisions (due to their age related mental decline) and it helped keep her parents reasonably financially stable until they died last year.

      It's OP's dad, I can fully understand wanting to do whatever can be done to help.

  • mysterytal on 21/02/2018 - 21:39
    +2

    He's 65…how much in superannuation? There must be at least $30,000. Get him to use that to pay off the debt.

  • PAOK11 on 21/02/2018 - 22:09
    -4

    Dont pay a cent!!!!!!! If your dad has no assets and is on the pension he is untouchable. All they will do is call the house down big deal, change your numbers every few months

  • Drifta on 21/02/2018 - 23:45
    +7

    As @Justme1234 mentioned above…I'll add a bit more to his words.

    1. Do not pay off a cent for him - if you do there are multiple chances of him using the available funds to keep gambling and there is no legal obligation for you to cover his costs. ultimately you will lose the 30k instead of the bank

    2. you can contact FOS for free, lodge a complaint that the bank should never have given him such a card limit. present all the facts and more then likely the bank will be out of pocket. They will try to play hardball as the banks highest complaint resolution officers call you to accept liability

    3. even if your dad was 100% liable - let him pay it under a 0% interest payment plan over xx years. you can probably pay $100/ month (negotiated by you as what is affordable). They will close his card under what is called "hardship" and put an internal red flag on his profile to ensure he can never get lending with that company again and also potentially credit list him which means he can not get a credit product with anyone for up to 5yrs(I think thats the expiry timeframe). You can also negotiate to pay off a flat amount..say 5k to cover this debt and end the matter - again will likely result in credit listing.

    4. if he has no other assets besides his family home he should declare bankruptcy - I would speak to someone more knowledgeable than me as I'm not aware of the full ramifications but if you do this the bank will have to write off this debt and he pays nothing. If in doubt you can always threaten to do this and the bank will negotiate a fixed amount as its better for them to get some money then none.

    5. If you need further info. contact the relevant gambler helpline and free financial counselors in your state. they can talk you through the options.

    If you're confident that the bank has wrongly given this credit limit and over the years kept increasing it despite your dad only having a 30k income and not because wrong information was supplied in the application… I would defs go down the FOS pathway as it is likely to result in the bank having to write off the full amount and your dad not getting any ramifications. Even if not I would explore FOS first if there is any doubt that credit limits have been increased without appropriate checks…just make sure fraudulent payslips etc were not supplied to justify these increases.

    1. worst case scenario dont pay yourself but there is a clause in superannuation laws that allow you to draw funds out to pay for financial trouble of this nature so you can use HIS super to pay for it. Its best to not involve your funds or even suggest it as the bank will happily take it. You can help him out with other living costs etc later on once all this is resolved if there is a need to.

    Disclaimer: Please note that this above should not be counted as financial or legal advise at any time as it is opinion without knowing your real position.

  • gth on 22/02/2018 - 09:05
    +1

    Be very wary of paying or accepting his debt as yours - you don't want your own credit rating affected by all this rubbish.

    Also, contact other banks and check if they have accounts in his name: there's a chance he's using other credit cards to pay the minimum balance on this one.

    I know a solicitor that purposely ran up 15 credit cards to their maximum limits just before his retirement - he knew that he'd declare bankruptcy at the outset, arranged his assets accordingly. Be wary of the mindgames that addicts play - they can justify a lot to themselves, that just wouldn't make sense to outsiders.

  • typistinahurry on 22/02/2018 - 09:35
    +2

    I would personally be getting this person (if they are fully invested in wanting to change and wanting to fix the situation they find themselves in) to contact the Financial Ombudsman for assistance. Banks are meant to be operating by an ethical lending policy which means that every single time a credit limit increase is offered, the bank must only do so if they are sure the customer has the income to service that increase.

    My very elderly dad (87 now) got into strife about 10 years ago in similar circumstances. He hadn't been working since the late 70s due to total and permanent disablement from an accident. He owned his own home but still had a bankcard even though he was on a pension and didn't get a big payout. Over the years the bank offered him more and more increases and when he met a woman who was happy to take financial advantage of him (he's a widower), the bank allowed that bankcard to blow out to $50K while my dad still only received a pension. But they knew full well that he owned the family home outright. So they suggested (coerced) Dad into taking a reverse mortgage to get rid of the credit card and then gave him a different credit card!!!! Then they undervalued his house by at last 50% of the market value to suit the bank's needs. They allowed (and my father foolishly used) a further $40K in credit card debt, all while still on an aged pension. So the bank decided to "help" by rolling that credit card into the reverse mortgage as well. My elderly father is terrified the bank are going to foreclose on him because the debt has quickly started to catch up to the bank's valuation of the property. I think it's at two-thirds at the moment and my father is a nervous wreck. He has no idea how to fix it and doesn't want me to go to the ombudsman because he thinks the bank is this all powerful beast who will take his home away if he dares question their practices. Yes, he's made bad choices financially but the bank have enabled him to do that when in all reality there is no way a pensioner should be allowed to amass that kind of repeated credit card debt. The bank knew his income. He had been a customer for decades. They just saw an opportunity to make money for the bank and they pursued it.

    I don't know how to fix things for my dad but if your family member truly wants to get out of this mess, they have to be willing to own their part in it and work with the Ombudsman to reduce the debt if there is scope for that based on the bank's breach of responsible lending practices and then destroy the card and pay off the debt, however long that takes.

    • Ti-au on 23/02/2018 - 00:36

      undervalued his house by at last 50%

      The banks only lend a certain % of the property to limit how much he can borrow to enforce the no negative equity guarantee (and even if they did undervalue - wouldn't that be better? as then he would have more equity left over?).

      I think it's at two-thirds at the moment

      You should run the calculator - https://www.moneysmart.gov.au/tools-and-resources/calculator…
      It will give you a more accurate figure.

      Also check the rate, if it's high refi to CBA (or other) for a lower rate (current: 6.7% or so).

      I mean if you wanted too, with the house growing 4% a year, you would only have to pay the 2.7% to the bank (about $50 or so per week) and you would effectively freezing the loan - and you would be paying about >2% of your household income (assumes dual income household).

      Or perhaps even look at buying the property and then renting to your father (he may be able to qualify for rent assistance, which could help pay the mortgage), plus any loss would be a tax deduction too you (assume market value rent, etc).

  • [Deactivated] on 22/02/2018 - 14:31
    +2

    I have a family member who has a gambling addiction

    It was bitcoins wasn't it

    • treefiddy on 22/02/2018 - 18:10
      -3

      Such an edgy comment. Does it make you feel better having joked about the destruction of this persons family?

  • points4life on 22/02/2018 - 18:16
    -2

    Most banks will simply have a checkbox that reads "I confirm that my annual income is X and i'm able to repay X". Most likely they lied to get the higher limit, it's auto approved most of the time without additional checks. Just take the credit card of them and cut it up, best thing you can do.

    • trev likes bargains on 23/02/2018 - 06:11

      That's silly. They will get the card replaced

    • freemoneyhunter on 23/02/2018 - 16:12
      +1

      Yes that is true, Commonwealth Bank tried to get me to raise my credit limit, they send out letters saying you can increase your credit limit to 20k or whatever just by ticking a box saying you confirm you are making over 70k a year or something.

  • imahapyboy on 22/02/2018 - 18:23

    good boy, can you clean up my other card as well?

  • Aneurism on 23/02/2018 - 05:13

    I believe that as people approach bad debt that seems like a mountain to clear..they end up giving in mentally because they tend to think bankrupcy would solve their problems.. (assuming they have offloaded large assets of value)..Generally you want to reduce your exposure to the fallout when the money chase begins.

    Credit limits are opt in these days..but the problem is an addict tends to use whatever mechanisms they can which feed their addictions.. Things won't change unless they want to change, they act to change and they have enough courage to see it through.

  • centrelink on 23/02/2018 - 11:35
    -1

    I did an online application once for a cc with cba and got rejected. Apparently owning a business with six figures profit not good enough

    • trev likes bargains on 23/02/2018 - 13:53
      +1

      They probably thought you were on centrelink benefits

      • centrelink on 23/02/2018 - 21:20
        +1

        Even people on Centrelink can get credit cards as well

    • pformag on 23/02/2018 - 14:22
      +2

      Banks feed directly into Ozbargains, username flags.

    • Baysew on 23/02/2018 - 14:28

      You might use that money for gambling when you turn 65.

  • Davo1111 on 23/02/2018 - 15:36

    I'm surprised the bank hasn't disabled the card, but accrued debt.

    My only guess is that he actually repays it with winnings. So they allow him to increase the limit.

    Sorry to hear about your situation.

  • oranje on 23/02/2018 - 18:45

    This doesn't exactly answer your question but I understand that you wish to help out your father. See if you can get him to self-exclude from the casino - this will essentially ban him and any reasonable casino will offer this. If he refuses, see if you can do this on his behalf (e.g. Call in or email pretending to be him).

    • Findo on 23/02/2018 - 21:41
      +1

      Nah most venues want the person being excluded to sit down for a quick interview and a mugshot

    • Baysew on 24/02/2018 - 10:10

      Call in or email pretending to be him

      Just because the father is involved with deception over gambling, doesn't mean the son would want perpetrate deception as well.

      • oranje on 24/02/2018 - 20:28

        That really is up to the OP to decide

  • Briefcase Mong on 24/02/2018 - 11:26

    Seek a financial counselor

  • saine on 24/02/2018 - 11:55
    +1

    Absolutely agree with those advising against balance transfer. The banks do have mechanisms for dealing with these issues. You could start by complaining to FOS about the irresponsible credit offers and get them to mediate.

    This sounds like it is a spiralling behaviour at this stage of his life, so if possible you should try and encourage him to go to a Gambler's Anonymous meeting or counselling from Gambler's Help. They also have help for families of addicts, who can support you and your family in navigating the issue, particularly if he is at the stage where he doesn't want anything more than financial help.

  • Quantumcat on 25/02/2018 - 01:10

    After you've sorted out the debt (FOS etc) maybe buy him an old pokie machine to have at home - he can get all his dollar coins back then!

    • Findo on 25/02/2018 - 03:10

      Pokies are illegal to own in NSW without a gaming licence. The fine can potentially be greater than his current card debt. Also, what good is a pokie machine that doesn’t take other people’s money? Say he feeds in $1000 and a feature pays out $1400, the $400 isn’t going to magically appear out of nowhere.

      • Quantumcat on 25/02/2018 - 07:58

        I guess he would have to stock it with lots of coins to begin with just in case he gets an early win (after a while I imagine it would be accumulating coins rather than give too many out).

        • Findo on 25/02/2018 - 08:57

          The coin hopper only holds a limited number of coins. On top of owning a machine, OP’s father will need to be able to administer wins to himself and regularly empty/refill the machine. The solution is to abstain from gambling, there is no gambling in moderation for addicts.

  • psdillon on 27/02/2018 - 11:54

    Using a credit card for gambling is the same as a cash advance, so there is a massive fee every time he deposits.

    Too bad there isn't some sort of social addictive game for older people… it's much less expensive to play World of Warcraft!

  • CacheHunter on 27/02/2018 - 15:03

    I'm unable advise on your specific circumstances, but get in touch with a consumer credit legal centre or community legal service. Advice is often free or low cost. I suspect that the lender has breached their obligations to ensure that the credit provided is fair and reasonable. There have been instances where courts have waived part or all of debts where there has been irresponsible lending.
    Source: I used to work for the government and helped draft the consumer credit legislation

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