A woman has been refunded $9000 and given $2000 as compensation after her bank gave her a credit card limit of $24,500 - when she only earned $27,000 a year.
The Banking Ombudsman Nicola Sladden says the woman was forced to use a third of her total income to meet the minimum monthly repayments on the card.
An investigation into the bank found it had breached its responsible lending obligations when it increased the woman's limit from $9500, to $14,000 then to $21,000.
The Ombudsman found the bank had not assessed whether the woman could afford the increased limits.
The bank argued the Credit Contracts and Consumer Finance Act 2003 did not require it to check whether credit card limit increases were affordable - but this was not accepted by the Ombudsman.
Sladden says the bank did not meet its obligations and therefore should reimburse the woman $9000 for her fees, interest and credit card repayments charged on the increased limit.
Sladden also says the bank should pay an extra $2000 for the inconvenience.
"Too much credit card debt can lead to financial stress and hardship. Banks are required to check whether credit limit increases are affordable for customers, and in this case, it did not make the right enquiries," she said.
The woman also complained that she and her partner had missed out on a home loan because the bank's app showed incorrect information about what funds were available, meaning the pair spent beyond their means.
She says she ended up with an adverse credit rating and their home loan application was denied.
However the Ombudsman found although the woman had asked for the shadow limit to be removed from her personal account there was no evidence she had asked the same for the joint account.
While the bank's app did have some confusing information the displayed balance was correct.