2015 - 2016
Bank accounts
Transactional account
Mr Y stopped paying his rates because of a dispute with the council. Mr Y had repaid his bank loans on the property, although he had not instructed the bank to discharge the mortgage, with the result that the title still showed that the bank held a mortgage over the property.
The council wrote to the bank advising that there were rates arrears and that if Mr Y did not pay them, the council would issue a demand on the bank as mortgagee of the property. The Local Government Rating Act 2002 gives councils the power to demand that the mortgagee pay rates arrears. The Act also says that such payments are to be treated as part of the money secured by the mortgage.
The bank advised Mr Y of this development. Mr Y went to his local branch where he was again told the bank would be obliged to pay any rates demand, and that the amount would be debited to his account. Mr Y asked if there was any way to prevent the council from issuing the demand on the bank. The branch said it would make some inquiries and learned there was, in fact, one way – if the mortgage was discharged. However, the branch failed to pass on this information.
Several months later, the council issued a demand on the bank for rates arrears of $2,000, which it paid before debiting the same amount to Mr Y’s account. Mr Y complained to the bank, which said it had no option but to pay when served with a formal demand.
Mr Y complained to us. We acknowledged the bank’s legal obligation to pay the amount, and also its right to debit Mr Y’s account, but we were concerned that the bank had failed to answer Mr Y’s question about how to prevent the bank from being served with a demand. The bank offered Mr Y $500 for the inconvenience he suffered in not receiving an answer. Mr Y declined the offer, believing the bank should pay him the amount debited to his account. We did not consider he had suffered a financial loss because it appeared the money was owed to the council, and Mr Y reluctantly accepted the bank’s offer.
