Loan agreement spelt out possibility of early repayment fee

Early repayment charges,
Crystal took out a home loan with an interest rate fixed for two years. A year later, she decided to sell the property and buy another. Staff at her local branch told her she would not have to pay an early repayment fee, but a week later when she signed documents for a new loan, the bank told her it would apply an early repayment fee of $1,400.
November 2019

Crystal said it was unfair to charge the fee when branch staff said this would not happen. She wanted the bank to stick to the advice it gave. If she had known she would have to pay the fee, she would have considered switching to another bank.

She wanted the bank to reimburse the fee, but the bank said the home loan documents clearly spelt out she would have to pay the fee if she broke the term of the loan. It acknowledged branch staff had given her incorrect advice and offered to increase its cash contribution offer on the new loan from $2400 to $3200 as compensation.

Crystal found the bank’s response unsatisfactory and contacted us.

Our investigation

When a bank provides incorrect advice, we consider what would have happened if the correct advice had been given when we assess direct losses. Crystal wanted the bank to stick to the original advice and refund the fee; we would only recommend reimbursement if we were satisfied she could have avoided the fee if she had been told about it earlier. The loan contract gave the bank the power to charge the fee and the incorrect advice didn’t affect this power.

Crystal said if she been told about the fee when she first asked, she would have tried to get a better deal with another bank she had accounts with. However, this other bank’s deal was significantly less generous than the current bank, and she would have been worse off financially. We acknowledged that the bank’s incorrect advice denied Crystal the opportunity to shop around, and we thought the $800 increase to the cash contribution was a fair amount to recognise this.


We did not uphold the complaint.

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