Is my bank allowed to question my transactions?

July 29, 2020
Safety and Privacy

Is my bank allowed to question my transactions?

When did it become OK for banks and lenders to scrutinize my spending?

By Jason Bryce


Banks and mortgage lenders are increasingly asking their customers and borrowers about their spending. Uber Eats, online purchases, Dan Murphy’s, all these transactions are being scrutinised by lenders wanting to know more and more about us.

This increased checking of our spending began around 2018 when regulators like the Australian Prudential Regulatory Authority told lenders to tighten their eligibility for home loans.

Now, COVID-19 and the associated health scare as led to many people not using much cash at all, thereby exposing their entire spending history to their bank.

Cashless transactions mean a trail of data is left behind. Cash may be safe, private and surcharge-free but card and online transactions are full of information about you that can be used to sell things to you or judge you and your suitability for financial products.

It’s one thing to have advertising targeted to you because of that item you just purchased on eBay. That may or not benefit you. But what about if that purchase information is clearly used against you? To reject your loan application for example?

Who owns my data?

Your own information can potentially be used in ways that may not be in your interests. For example, your habits, hobbies, spending patterns could potentially be used to reject a loan, or an insurance claim.

Mortgage Choice chief executive Susan Mitchell said technology “has been a real game changer” for loan applicants.

“No one uses cash, so everything can be tracked when you use your cards," Susan Mitchell told The Daily Telegraph.

Back in 2018 when this was just starting to be noticed by borrowers, Gemmill Homes Managing Director Craig Gemmill warned homebuyers that banks were scrutinising spending and bank account statements.

“In the past banks would work out a multiple of your income, less big stuff like car debts and credit cards.

“Now, they’re looking at your bank statements to see how often you have takeaway food.”

Can governments use my bank account data?

Where is it all leading?

In a largely cashless economy, all your transactions could potentially be looked at and possibly used to question your suitability for a mortgage, loan or insurance policy. But that is just the start.

In China, citizens can be rated and given a score that combines their financial history with their social media activity and other measures. All of these factors are entered into an algorithm that spits out one score. And your score can be affected by the scores of your friends and associates online. That’s nightmarish because it creates social peer pressure to conform.

The American Civil Liberties Union is particularly concerned that a comprehensive system like this could spread even to democratic nations around the world.

Can banks make moral decisions about their customers?

Do you like to gamble? Do you like Uber eats? Here’s some bad news for you. Banks don’t look favourably on those activities. More than 500,000 Australians bet on sports says the Australian Institute of Family Studies but lenders can use your gambling against you.

Mortgage broker Steve Vicary told Domain that “a gambling habit is a red flag to a lender.”

Mr Vicary said he had “a couple of clients” who have been asked about their gambling by mortgage lenders.

“If a credit officer sees a regular expense for a gym or a regular expense for gambling, I know which application is more likely to be approved.”

A $50 weekly bet could reduce your borrowing capacity by $32K said Steve Vicary.

Similarly Uber eats expenditure is not looked favourably and even Afterpay can haunt loan applicants. Afterpay is classified by lenders as debt. A missed Afterpay payment can be viewed as a default.

Can Afterpay affect my credit score and loan application?

Yes using Afterpay is definitely something lenders look at.

When Amy-Louise Parsons applied for a mortgage her broker noticed her Afterpay purchases on her bank account statement.

"I had to cancel my Afterpay account and send something saying that I'd paid it off and I closed my account,” said Amy.

“I actually had to physically cancel my account to get my mortgage."

Who owns my bank statement information?

A bank statement is a legal document. You own the information, along with the bank, but to apply for a loan or other financial product you may be asked to produce your statements.

Have you sent your mate money and attached a joke label to it?

Like “For Drugs LOL” or “Thanks for BJ” or “Great sex”

Loan broker Chris Foster-Ramsey told the property site that even joke labels on payments can lead to questions from banks.

“If that person happens to be in the property market, the bank’s going, ‘Hang on, what’s this?”

“Bank statements are a legal document, you have to be semi-serious about it,” said Chris ”As fun as it may be, it’s not advisable to be creative in the transfer text.”

These questions “can cause unnecessary delays to an already lengthy application process.”

Are card transactions private?

No they are not.

You may be the technical owner of all information about you and your purchases, but that information can be used by lenders, banks and other parties in ways that you may not understand or benefit from.

Cash is safe, private and surcharge-free.

This information is general in nature and does not take into account your personal situation.  You should consider whether the information is appropriate to your needs, and where appropriate, seek professional advice from a financial adviser.
If you or someone you know is in financial stress, contact the National Debt Helpline on 1800 007 007.

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