Bank entitled to include residency status in lending criteria

Concerns about lending decisions, Lending restrictions,
George applied online for a home loan. The bank's website set out some basic application criteria, including that applicants must be a New Zealand citizen or resident and must be able to afford the repayments from their salary or wage.
February 2022

George mistakenly selected the option that he was a New Zealand citizen or resident, whereas he was, in fact, on an investment visa. He intended using income from overseas to repay the loan. The bank's system generated an automatic conditional approval based on the information he had given, subject to verification of documentation and satisfying certain other conditions. The bank asked, among other things, that he provide proof of New Zealand residency or citizenship. George replied the same day, attaching a copy of his investment visa and other information. Three weeks later, the bank declined his application because he did not meet the critiera.

George challenged the decision to decline his application based on his residency status, which he believed was unfair because he was in a sound financial position. He was also unhappy with how long it had taken the bank to communicate its decision. Interest rates rose significantly during the three weeks he had waited. If it had advised him earlier, he could have secured a better rate with another bank.

Our investigation

We explained that banks are entitled to determine the level of risk they are prepared to accept when lending money, and we could not interfere with the bank's policy of having a residency criteria. We acknowledged he had waited a considerable time for the final decision, but the bank’s website, application form and conditional approval email all drew his attention to the eligibility criteria. Had George completed the application correctly, the bank would have declined his application straightaway.


George withdrew his complaint.

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