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March 8, 2012

CBA undertaking: misleading message on credit card limit increase invitation consents

Even though the National Consumer Credit Protection Amendment (Home Loans and Credit Cards) Act 2011 permits the obtaining of informed consents for credit limit increase invitations before the prohibition on unsolicited credit limit increase invitations commence on 1 July 2012, ASIC has taken the view that a recent CBA promotion was misleading and the consents obtained were not valid.

ASIC has announced it has accepted a court enforceable undertaking (EU) from Commonwealth Bank of Australia (CBA) that it will not rely on the consents obtained from customers on 12 and 13 December 2011 and that it will contact each customer who consented correcting any misleading impression and informing them of their rights.

According to ASIC, on 12 and 13 December 2011, CBA sent messages via its internet banking platform to customers notifying them of the changes to the law regarding credit limit increase invitations. CBA requested that customers provide their consent to continue to receive credit limit increase invitations. Approximately 96,000 customers provided their consent. CBA immediately withdrew the message when ASIC raised its concerns.

ASIC formed the view that the messages were misleading as they:

  • suggested that if CBA’s customers did not complete the electronic consent in response to the message they would lose the chance to receive credit limit increase offers
  • suggested that if they did not consent, customers would miss out on opportunities to access extra funds should they need them, and
  • created the impression that customers needed to act urgently, which may have led customers to respond without properly considering their options.

In addition to concerns about the messages being misleading, ASIC was also concerned that the consents were not informed as required by the Act.

Credit providers are permitted to seek and obtain consents from consumers to receive credit limit increase invitations prior to 1 July 2012 so they can rely on those consents for the purpose of making an unsolicited credit limit offer after commencement.

The consumer may withdraw the consent at any time.

After 1 July 2012 a licensee must keep a record of consents the licensee obtains and withdrawals of such consents.

Any consent must be informed consent. Before obtaining the consumer’s consent, the licensee must inform the consumer of the following matters:
(a) that the consumer has a discretion whether to apply for any increase of the credit limit;
(b) that the licensee has a discretion whether to grant any increase applied for;
(c) that the consumer may withdraw the consent at any time;
(d) any other matters prescribed by the regulations.

Background

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Posted 8th March 2012 by admin in legislation, responsible lending