The Banking and Financial Services Ombudsman‘s latest Bulletin (pdf) discusses procedures lenders should follow in resolving disputes over making unsolicited offers to increase credit card limits.

Giving an example of a person on an annual income of $38,000 who was experiencing difficulty meeting the minimum monthly payments on credit cards with two lenders with limits totalling $41,000, the Ombudsman has suggested that lenders should apply their criteria for new credit to the financial position of the disputant at the time the unsolicited offer was made to establish the amount that should have been offered.

The Ombusdman also discusses a number of cases where inaccurate or incomplete information was provided to the lender in the application for a new credit card. In some cases it is said that, if the lender had undertaken verification of that information, the inaccuracies or missing information could have been discovered.The Ombudsman considers that in most cases of credit card lending the lender is entitled to rely on the information provided by the applicant. However, he will consider whether the information provided was clearly incorrect or nonsensical on its face.

The Ombudsman contrasts credit cards with personal loans: it is prudent lending practice for the lender to obtain information about the nature and period of employment when assessing any application for a personal loan, including for the young applicant.