Loan was affordable based on information bank held

Concerns about lending decisions,
Zahir took out a $17,000 bank loan to buy a car. The loan was arranged by a loan broker introduced to him by the car dealer. Zahir was also put in touch with an insurance agent who arranged loan payment insurance. Shortly after the purchase Zahir discovered some problems with the car.
June 2020

Three months after buying the car, Zahir lost his job and could not make repayments. Within a short time, the loan fell into arrears. Zahir tried to catch up but could not repay the arrears or keep up with payments.  About eight months later, the car was repossessed by the bank and sold at auction for $5,000. Zahir had not been able to make a claim under his loan payment insurance. 

Zahir said the loan had never been affordable and said the bank, which was not his regular bank, failed to make reasonable inquiries about whether he could afford the loan. He said the bank should have verified the information in a letter from his employer about his income and length of employment. He said he had not seen the employer letter before he made his complaint, and the information in it was inaccurate. Zahir also said the bank should have obtained three months of bank statements as part of the loan assessment process. 

Our investigation

When we met Zahir, it was clear to us he was a vulnerable consumer who had probably been duped by the car dealer into buying the car.

We looked at the bank’s assessment of the loan application.  It had obtained a credit report, which showed no defaults and little history of debt. The bank considered the information the loan broker had collected from Zahir about his expenses. The bank had also checked with Zahir’s employer who confirmed the accuracy of the information in the letter. The bank did not seek copies of Zahir’s bank statements for the previous three months. It said it would have done so if the information it held about his income, expenses and credit report had raised any questions about whether he could afford the loan repayments.

We noted there was no information to show the bank was aware that the employer letter contained inaccurate information about his length of employment. Further, the information provided to the bank about his income did not appear to be inaccurate. 


Zahir accepted that, based on the information held by the bank, the loan was affordable. The bank agreed not to take action to recover the debt, but rather to check every few months whether he had found another job, at which point it would work out a suitable repayment plan with Zahir.

Zahir’s case highlighted the difficulties for a consumer in pursuing such a complaint.  He had concerns about the car dealer’s sales process. He was also concerned about his dealings with the loan broker, the bank, the insurance broker and the insurance company. Zahir was fortunate to have representatives to assist him to pursue his complaints.

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