Bank didn’t use bankruptcy information but was entitled to hold it

Categories:
Credit laws and banking, Concerns about lending decisions
Summary:
Casey applied for a home loan from his bank, which the bank declined, citing a bankruptcy debt it had written off 10 years earlier. Casey complained about the bank’s reason for declining his application, given that it had provided him with several home loans in the years after his discharge from bankruptcy. The bank reviewed the situation, and agreed it had given him the wrong reason for declining the loan application. It was declined because it did not meet the bank’s lending criteria in terms of the loan-to-value ratio requirements and serviceability. The bank apologised, and offered to refund Casey’s credit cards fees for the previous two years totalling $130 as a goodwill gesture for giving him incorrect information about the loan decline.

Casey complained about the bank giving him conflicting reasons for declining his application and for retaining the bankruptcy information on its file.  He said the record of the debt should have been wiped from the bank’s records when he was discharged from bankruptcy. 

Our investigation

We accepted the bank had followed its normal lending criteria in declining Casey’s application.  We also agreed the bank’s communication of its decision was not satisfactory. We pointed out to Casey that while there were time limits on retaining bankruptcy information on public registers and by credit-rating agencies, these time limits did not apply to an organisation such as a financial institution who had provided credit to its customers. 

The bank was entitled to retain the historical credit information on file because such history remained a possible relevant factor in assessing future credit applications.

Outcome

Casey accepted our explanation and the bank’s offer. 

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