Case note: is there a duty not to provide credit to gamblers?

In Case 470792 FOS decided that a financial services provider (FSP) was not obliged to review or monitor what a credit card was being used for when approving credit limit increases. The FSP also had no obligation to prevent the customer from using the credit card for gambling purposes.

FOS’s determination of Case 470792 relied on the NSW Court of Appeal decision of Reynolds v Katoomba RSL All Services Club Limited [2001] NSWCA 234 that the law should not recognise a duty of care to protect persons from economic loss, where the loss only occurs following a deliberate and voluntary act on the part of the person to be protected.

The customer had a credit card account with an initial credit limit of $5,500. The FSP subsequently approved a number of credit limit increases bringing the limit to $25,500. The dispute was about whether the FSP lent responsibly, in light of the customer’s gambling.

The customer argued the FSP had an obligation to assess whether the credit limit increases were suitable. The customer accepted there was no obligation on the FSP to prevent them from gambling. The customer said the FSP had an obligation to notice they were using funds lent to them to gamble, in which case no further credit limit increases should have been approved.

FOS concluded:

“It was the [customer’s] individual decision to use the funds to gamble. The relevant legal principles are such that the account holder must accept responsibility for her own actions in using the funds in this way and the FSP is not liable to refund the amounts withdrawn and used by the account holder. …

The FSP does not owe an obligation at law (or under the credit contract) to review/monitor how he uses his accounts. Its obligation is to consider his financial situation and whether or not he can afford any credit limit increase without incurring financial hardship. Therefore, the FSP is not required to provide any compensation or debt reduction.”

In Reynolds v Katoomba RSL All Services Club Limited [2001] NSWCA 234 the plaintiff claimed among other things that the club breached its duty to him by permitting the plaintiff to cash cheques on the premises and making advances of cash to the plaintiff. The Court of Appeal rejected the claim and concluded there was no duty of care and no unconscionable conduct by the Club.

Note: States and Territories have imposed different restrictions and withdrawal limits on ATMs and EFTPOS in gaming venues.

Related post: Online gambling lines of credit

Gambling Measures Act 2012

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