2015 - 2016

Lending

Property lending

Ms B and her parents took out a loan together and gifted the funds to Ms B’s brother for a business venture. The loan was secured by a mortgage over Mr and Mrs B’s property. Several years later, Ms B approached the bank to consolidate debt with other lenders into a personal bank loan.

The bank wasn’t prepared to give her an unsecured loan and suggested she secure the loan against her parents’ property. They didn’t want to be co-borrowers again but agreed to be guarantors. The loan documents were sent to Ms B and her parents. Ms B’s parents were listed as co-borrowers with their property as security, but they signed the documents. It was not clear if they knew they were agreeing to be co-borrowers rather than guarantors.

Ms B later took out further two loans with her parents as co-borrowers and their house as security. Ms B also had a credit card with her bank. The original limit was $1,800 but she increased it to $15,000. She later consolidated the credit card into a personal loan.

Ms B had trouble repaying her lending, believed her bank had lent to her irresponsibly and complained to us. We were concerned Mr and Mrs B were co-borrowers when they had expressly said they would only be guarantors. Ms B said that the bank had done this so that her parents’ income would be included in the credit assessment and if they had been guarantors instead, none of the loans would have been advanced to her.

The bank confirmed this was the case for one loan as Mr B didn’t meet lending criteria. For the other two loans, the bank had assessed only Ms B’s income and she had met the lending criteria. Our investigation also showed the bank had not taken into consideration Ms B’s limited income when allowing her to increase her credit limit.  

We thought there could be a case for irresponsible lending and advised the bank of this. It then agreed to reimburse interest charged on one loan and on the credit card since its limit was increased. This amounted to $5,500. It also offered to reduce the personal loan interest rate moving forward and pay her $1,500 for any inconvenience. Ms B accepted the bank’s offer and the complaint was resolved.