Misunderstanding over new loan did not result in actual loss

Freeing up capital,
Morgan's business needed more capital. She decided to sell her house and buy a cheaper one to reduce loan repayments and release capital for her business. She sought bank advice on what to do. It told her she might have difficulty getting a new loan after selling her house and repaying her home loan because her business was new and its income uncertain. However, the bank said it would consider accepting a new property as security for her existing loan if she settled the sale of her house and the purchase of a new one on the same day.
August 2012

Morgan found a new house and confirmed the purchase before applying to transfer the security. Shortly before settlement of her existing house, she discovered the bank required her to repay more of her loan than expected before it would agree to accept the substituted security.

Our investigation

Morgan repaid the required amount, but complained to us that she suffered a substantial loss because she couldn’t put the funds into her business, which subsequently failed. She said the bank misled her by giving the impression she would need to repay only a small part of the loan balance, allowing her to put most of the sale proceeds into her business.

We found it difficult to establish exactly what Morgan had discussed with the bank. She said the bank had assured her it would require only a small repayment of capital. However, the bank told us it could not say what the capital repayment would be until it knew the new property’s value and received an application for a substituted security. We concluded there had been a misunderstanding between Morgan and the bank.

We did not consider that the misunderstanding resulted in a direct financial loss for Morgan because the repayment had benefited her by reducing her debt. She believed a capital injection at the right time would have saved her business, but there was no way to prove that. We can take into account only actual, identifiable loss. We cannot look at the viability of a business or the possibility of future profit or loss.


We could not say the bank caused Morgan’s financial difficulties.

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