Case Studies Maladministration in Granting Credit In November 2003, Mrs T approached a financial counselling service with an unsecured credit card debt of $74,000. Mrs T was a 60 year old pensioner on a disability support pension. She rented emergency government housing, had no assets and had not worked for several years. Mrs T had initially approached a financial counsellor to discuss the option of bankruptcy as she could no longer afford to continue making repayments. The financial counsellor was concerned that the member had not adequately assessed Mrs T’s ability to service the debt. The account showed that the disputant was making regular fortnightly repayments however, she was in fact depositing her fortnightly pension to the card account and then withdrawing it again as a cash advance. The financial counsellor lodged a dispute with BFSO on behalf of the disputant. Resolution Following referral to the member, the member wrote to the financial counsellor and stated that it did not believe any maladministration had occurred in relation to the credit approval. However, in order to resolve the dispute it offered to reduce the credit card debt from $74,000 to $5,000. The member also offered to accept interest free payments of $50 per fortnight until the residual debt was repaid. Mrs T accepted this offer. Internet Fraud C’s company manufactured and exported exercise equipment. In 2002 it began selling to retail customers via its website, including to overseas customers. In November and December 2002, it received orders from Indonesia for equipment to the value of $20,000 with a request to split the price of the goods over eight credit cards. C received authorisation from its bank for the transactions and shipped the goods. In January 2003, it received orders from a different individual from Indonesia but again with a request to split the full price of the order over six credit cards. When authorisation was sought it was declined. In a conversation with the member’s officer about the implications of the decision to decline, C’s manager was told that there was a risk that the previous orders may be fraudulent. The transactions were in fact disputed by the true cardholders in late January 2003 and charged back to C. C’s dispute was that he had relied upon what he regarded as the member’s approval of the November/December transactions to send the goods. The merchant agreement, however, clearly stated that a transaction was invalid and could be charged back if it was not authorised by the cardholder. The Merchant Operating Guide provided to the business also made it clear that the purchaser’s bona fides were accepted by the merchant at its own risk and that when authorisation from the bank is obtained it does not guarantee that the purchase is being made by the cardholder. The case manager set out her view in a Finding. It was her view that in the circumstances there had been no misrepresentation by the member and no grounds for finding that the member should compensate C for the amounts charged back.   Print Screen | BFSO Home