Several years later, Fred asked the bank for money to finance litigation against his insurance company. The bank told him to submit a loan application, which it declined for affordability reasons.

Fred said the bank had no right to use the Earthquake Commission payments to reduce his loans and asked it to release the money to him. The bank declined to do so.

Our investigation

We explained that a bank, as mortgagee, had a right to decide whether to use Earthquake Commission payments to reduce a customer’s loan or to keep the money to pay for eventual repairs. This was set out in his mortgage documents, and it was also spelt out in the Property Law Act 2007.

 Outcome

 Fred was disappointed but accepted our explanation.