2015 - 2016

Lending

Property lending

Mr and Mrs P had a leaky home. They won a judgement against the builder, but he was bankrupt and couldn’t pay. They were under increasing financial strain and asked their bank what would happen if they stopped making loan repayments. They said the bank replied that their accounts would be transferred to its recoveries department, which would work with the builder’s bank (its other creditor) to come to an arrangement over payment of the builder’s debt. Based on this advice, they stopped making repayments, their loan fell into arrears and the recoveries department contacted them to recover the amount owing.

They complained to our office that they had incurred extra penalties and interest as a result of relying on the bank’s advice. The bank denied providing the advice. It said a staff member told them their accounts would be transferred to the recoveries department if they stopped making repayments. The staff member did not say the bank would attempt to recover the money they were owed from the builder’s bank.

When two sides disagree over the facts, it is difficult for us to make a finding unless there is evidence to support one side’s version of events. We therefore examine the wider circumstances and decide – on the balance of probabilities – what is more likely to have happened.

It was clear Mr and Mrs P stopped repayments after talking to the bank, but we could not conclude the bank actually advised them to do so. We noted the staff member was a senior person with significant experience in her role and considered it unlikely she would have given such advice.

We therefore decided it was more likely the bank had not advised Mr and Mrs P to stop making repayments.