A few months later, Tani was made redundant and couldn't keep up with loan repayments. He asked the bank for help, suggesting it could add his arrears to his loan or give him a mortgage repayment holiday while he looked for a new job.

The bank did not agree, but arranged for him to pay an extra $1,000 a month to catch up on his arrears. This would have reduced his arrears if he met all future fortnightly repayments.

Tani returned to New Zealand, but could not meet repayments, so his arrears did not reduce at the rate intended.

The bank decided it wanted back all the money it had lent him. It gave him four weeks to sell the property himself before instigating a mortgagee sale.

Tani asked the bank how much money he would need to repay his loan. The bank said about $400,000, adding that the exact amount would depend on when the loan was repaid.

Tani sold his property. However, when he repaid the loan, the bank deducted an early repayment charge of $12,000 from his sale proceeds.

Our investigation

Tani complained to us. He said the bank did not help him when he asked for it, and this led directly to his having to sell the property for less than it was worth. He also complained that the bank had not told him about the early repayment charge, and sought a $12,000 refund.

We found the bank was entitled to decide whether to help Tani, but were concerned his requests did not appear to have been properly considered. We proposed the bank should pay him $500 for failing to properly consider and respond to his requests.

We also found the loan agreement entitled the bank to apply an early repayment charge, but we considered the bank had made an error by failing to tell him this. Given Tani’s property was going to be sold at mortgagee sale if he did not sell it himself, there was no round the charge. Therefore, we did not think the bank should refund the $12,000. Instead, we proposed the bank should pay Tani another $500 for failing to tell him about the charge.

Outcome

Tani and the bank accepted our proposal, and the complaint was settled with the payment of $1,000.