Bank failed to disclose effect of default despite customer expressing credit rating concerns

Hardship and financial difficulty,
Sawyer came to New Zealand in 2019 on a student visa. He began working in the finance sector and the following year obtained a personal loan with the bank and kept up with all repayments. In June 2022 he had to leave his job and return home to deal with a family illness, impacting his student visa. Before leaving, he called the bank to explain his situation and to ask whether the bank could extend the term of his loan, which would reduce the size of his monthly repayments and enable him to keep up with the loan. He pointed out that he had been very conscientious with his repayments and explained he needed to maintain his credit rating for his permanent visa application and his work in the finance sector.
September 2023

The bank said it could not do this, and that his only option was to make a hardship application. Sawyer said he did not want to do this because it would affect his credit rating. Sawyer did not apply for hardship but called the bank from overseas the back on a number of occasions before his next payment was due, seeking a solution. In one call, the bank acknowledged his concerns about his credit rating and suggested he miss his next payment, which would enable another team within the bank to look at his case. Sawyer asked to be passed to that team beforehand, but was told this was not possible. Sawyer did as suggested and missed his next repayment of $280. A member of the second team contacted him a few days later and he immediately paid $200 of the missed payment and came to an arrangement to repay the remaining $80 over the next five months.  He kept to this arrangement while still keeping up his regular payments.  

Sawyer returned to New Zealand a few months later to learn his rating with credit agencies had fallen because the bank had reported his loan as in arrears until he had repaid the $80. He complained to the bank that it had never made him aware it would take this step. The bank maintained that the terms and conditions of his loan made clear it could report arrears to credit agencies, and it considered him to be in arrears until he had repaid the missed payment in full. It acknowledged it had not made this clear during the call in which he and the bank had reached an arrangement to repay the arrears, but it said he had not specifically asked whether the arrangement would affect his credit rating. Sawyer was dissatisfied with this response and asked us to investigate.

Our investigation

We examined the terms and conditions of the loan, and while these said the bank could pass on information to credit reporting agencies, they did not specify the circumstances in which arrears would be reported. We reviewed the bank’s contact with Sawyer to see if it had communicated this to him in another way. We noted Sawyer had been proactive about contacting the bank and had been clear and emphatic about the need to preserve his credit rating, both for the sake of his residency application and his future career in finance. We listened to the call in which he and the bank came to the arrangement about repaying the $80. The bank should have clearly and specifically advised Sawyer that the arrangement: that would mean his loan would show as overdue on credit reports until the $80 was repaid in full. However, it did not provide any information to him about this, even after Sawyer reiterated in the call how important it was that he maintain a clean credit rating. The bank sent him a letter about the repayment arrangement, but this, too, made no mention of the fact the arrangement would be reported to credit agencies and affect his credit rating. In short, the bank failed to tell Sawyer about the impact of the arrangement, and its letter was equally inadequate in this respect – and all this despite Sawyer having repeatedly made clear his concerns about jeopardising his credit rating. Sawyer had told the bank on a number of occasions that he could seek help from family members if necessary, and we were satisfied he would have done this instead of entering into an arrangement for the $80 if the bank had told him about the implications of it.


We shared our concerns with the bank about its failure. It offered to correct Sawyer’s credit rating and pay $3,000 compensation for the stress and inconvenience it had caused him. He accepted the bank’s offer.

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