ABU DHABI // Having had credit card details stolen by fraudsters and seen easy money evaporate in the global credit crunch, bank customers are being dealt another blow as borrowing limits are slashed - often without warning. Standard Chartered Bank said yesterday it had reduced the credit limit of some card holders to Dh1,000 (US$272), while some HSBC customers found their limits cut by as much as 80 per cent in the past few days without warning.
In addition, some banks have reduced the amount of money that can be withdrawn from ATMs by credit card. Frustrated Christmas shoppers in the capital's malls reacted angrily to the unannounced cuts, particularly as they came in the run-up to the festive period. Shopkeepers said credit cards were being declined much more often than usual, leaving customers furious. Vicky Mabbott, 24, was shopping in Ralph Lauren in Deira City Centre in Dubai when her credit card was declined.
"At first there was anger," she said. However, after a phone call she later managed to convince her bank to reinstate her original limit. A source within Standard Chartered, who wished not to be named, said banks feared customers facing redundancy would withdraw money on credit cards and leave the country. "If they know they're going to lose their job, some people are getting a credit card at every bank, maxing them out and then leaving," he said. "Banks are really worried that it's going to start happening a lot. Before, when times were good, if you had big career potential in the UAE then you wouldn't risk that."
Some customers were informed of the cuts by text message, while others only found out when they tried to pay for items. "I was shopping for Christmas presents for my fiance at the Gap and my card was declined," said June Hanley, who lives in Abu Dhabi. "I tried two other stores but they didn't work either. I assumed it was just a problem with the bank or the phone line, but when I called they said my credit limit had been cut from Dh75,000 to Dh15,000, so I had maxed out my credit card without even realising it."
Miss Hanley said no one at the bank explained to her why the cut had happened. "I don't mind the decrease as I never needed that much credit, but they gave me absolutely no warning. No phone call, no text," she said. "I don't know what would have happened if I had been on vacation." Miss Hanley's bank, HSBC, said it had sent letters informing its customers of the changes to their credit limits on Dec 11, the same day the limits were cut. She was told she would receive a letter explaining why her limit was reduced by the end of the week.
Thimal Perera, the HSBC regional head of credit cards, said the change was in line with the bank's normal practices. "As an ongoing practice and in-line with market conditions HSBC monitors and reviews its customers' card usage, payment patterns and associated risks. Based on this information credit limit is adjusted upwards and downwards," she said in a statement. However, callers to the HSBC customer hot line were told the cuts were due to the global financial crisis, which had forced the bank to re-evaluate how much money it lent to consumers on their credit cards.
If a customer had missed a payment in the past six months the probability was that their credit limit would have been cut, said a customer service representative. But she did not know how many customers had been affected. "It's not every card holder, but most of them," she said. Cardholders with clean records were also hit. "We were trying to get down the limits on some customers who had missed payments or had stopped repaying altogether but we ended up reducing the limits on other customers' accounts by mistake without notifying them," said an HSBC employee. "We are amending the errors as soon as we can."
Miss Mabbott's card was one of those affected by the error. "As soon as I got out of the shop, I phoned the bank and asked what had happened. They said my credit had been slashed to Dh3,000, but that it was a technical error and that they were going to fix it." Within a few days, her card worked again, she said. A technical glitch also affected Lalitha Binaji, 29, who fought with HSBC for three days to have her Dh8,000 limit restored to its original Dh40,000.
"When I called they said I had Dh37 left on my credit card. Then they said there had been a system error and that it would be fixed within an hour. The next day I went out to do Christmas grocery shopping and it was declined again," she said. "They said the system error hadn't been fixed because there was such a long line up." Ms Binaji said she travelled home to India frequently and felt the bank could have put her in danger by failing to warn her of the changes.
"I was in India during the attacks in Mumbai and I used my credit card to get out," she said. "What if this had happened then?" Shopkeepers have also noticed an increase in the number of "do not honour" notices feeding through their credit card machines. "People are getting confused. They're saying we have more money than this, there has to be something wrong with the machine, so they make us try it again and again," said Luiza Ibragimova, a clerk at the Gap in Al Wahda mall in Abu Dhabi.
At Abu Dhabi Commercial Bank, those who are applying for a new credit card are being granted lower credit limits than before because of the financial crisis, according to a telephone operator. "The normal policies we've had, we've just changed it for the time being because of the market crisis," he said. "If you were available for up to Dh50,000, maybe this would come down to Dh30,000." The ongoing investigation into the widespread ATM fraud affecting banks in the UAE has spurred the National Bank of Abu Dhabi to limit the amount of money customers can withdraw on their credit cards.
"They can withdraw up to 60 per cent of the credit card limit in cash per month," said John Malouf, the general manager of consumer banking. "The reason that we are doing that is because there has been considerable credit card fraud." More than three months ago, a breach was found on the banking network used by all banks in the UAE to share sensitive data such as PINs. Senior banking officials said the fraud, which is continuing, was costing banks tens of millions of dirhams. The source of the breach is believed to be a UAE-based bank, and the Central Bank is conducting an investigation, which was announced in September.
Information about the fraud has yet to be released, to the anger of some bankers who have said the lack of results cast a negative light on the Central Bank. Officials at both RAK Bank and Citibank have said they are operating normally. jgerson@thenational.ae hnaylor@thenational.ae