Amex application form question

[bambbbam2]

I was mailed an application for the gold amex card.

In the conditions on the back, it says "If you live in the ACT you may be required to provide additional financial information before your application can be considered".

Why would this be? Is it due to no freehold land in the ACT or something?

Not that it affects me, just thought it was very odd.

 

[Mal]

Why would this be? Is it due to no freehold land in the ACT or something?

The Fair Trading Act in the ACT prevents credit card lenders from starting a credit card or providing credit limit increases unless they know about a person's ability to repay.

See S.28/S.28A and S.28B [Pages 20-23] here: http://www.legislation.act.gov.au/a/1992-72/current/pdf/1992-72.pdf

 

[Dave Noble]

Shouldn't they be checking the ability to repay for all potential debtors in all states / territories though

Dave

 

[NM]

Shouldn't they be checking the ability to repay for all potential debtors in all states / territories though

Dave

They should do. but are not required by law to do so.

 

[Mal]

Shouldn't they be checking the ability to repay for all potential debtors in all states / territories though

Indeed. There are many ways to check, however the ACT is more specific about *how* to check... so they need to tick the boxes correctly.

I think most Lending Acts/Fair Trading type legislation in Australia says that they must be satisfied that the person can support the increase/new card application. Hence things like making you sign or agree that you can support the debt being offered and asking your income etc.

 

[Dave Noble]

Indeed. There are many ways to check, however the ACT is more specific about *how* to check... so they need to tick the boxes correctly.

I think most Lending Acts/Fair Trading type legislation in Australia says that they must be satisfied that the person can support the increase/new card application. Hence things like making you sign or agree that you can support the debt being offered and asking your income etc.

I don't see that asking the person requesting the credit to agree that he can repay is very diligent by the card companies.... is the applicant really going to tickno

Dave

 

[Mal]

is the applicant really going to tickno

I doubt it too ... but it does help the bank if challenged later for "unfairly" letting someone get into too much debt.

 

[Diesellife]

Well a tick is essentially better than no tick and it's only one of the requirementsssssssss.

And working in the industry... I see a lot of people with no common sense or just "pure honesty".

 

[bambbbam2]

Thanks Mal

You really do learn something every day!

 

[greenfrog86]

This is a sore point for consumer advocates - 'banks should have known the customer couldn't repay their debt'

Well I can tell you now that it is very difficult for a financial services company to know anything financial about their customer...

I undertand that the ACT legislation basically requires that for any CC limit increases, you need to provide the same amount of info as for an application.

Now for the catch 22 - the only way for financial institutions to determine your capacity to pay is to ask for the information in the app/CLI form (which you can lie on), look at your credit file, and ask you for documentation.

There are many on these forums who don't like the sounds of comprehensive credit reporting (which will allow banks to make much more informed decisions), people hate it when Amex asks charge card users to prove they can pay (ie documentation or cash), and many of you would be loathe to fill out a new application form each time you apply for/accept a limit increase.
Not to mention those of you who admit to declaring false info on credit apps.

After doing much work in the space of consumer hardship, I think it needs to be said that it is a two way street as far as providing information/checking it, until organisations have greater sources of information through which to check what their customers have provided.

 

[Dave Noble]

Comprehensive credit reporting A La USA is not even close to a solution imo. The FICO system there is , imo, completely screwy. It encourages debt since having debt facilities increases the score helping provide access to more debt

A proper validation of income combined with a level of increased credit reporting which shows the current potential max debt of the customer should ,imo, allow for responsible lending and borrowing. Making banks responsible if they grant access to debt facilities more than a certain level in relation to income would do the trick nicely

Dave

 

[greenfrog86]

Sounds sensible Dave - and agree, the US system is flawed and thankfully there is no such proposal for Australia.

It will however provide transparency around the number and limit of accounts held by a person which is much better than our current 'honesty' system which simply doesn't work.

 

[Dave Noble]

Sounds sensible Dave - and agree, the US system is flawed and thankfully there is no such proposal for Australia.

It will however provide transparency around the number and limit of accounts held by a person which is much better than our current 'honesty' system which simply doesn't work.

An honesty system is indeed also screwed; how can a proper decision on credit be made without properly validating the income that the customer claims to have and any outstanding actual or potential indebtedness and then verifying that the debt could be repaid within a sane period

Of course this would hurt the debt card companies whose ideal situation is customers that have a level of debt that they can meet the minimum payments on but not able to pay much more

Dave