However, arrears continued to accumulate, and in December the bank tried again to contact Caspian but was unsuccessful. It sent him an email notifying him the account was over its limit, asked him to pay the arrears as soon as possible, and said it was charging him a default interest margin. The bank did not hear back from him. In January 2023, it tried to call and email him and then sent a letter to his registered address asking him to pay the arrears immediately, noting that it might take steps to recover the full amount if he missed further repayments. At this point, Caspian began making repayments again, but he did not pay the arrears.

The bank tried three times to call him and sent two more emails, but each time drew a blank. In March, the bank took funds from the account of Caspian's acquaintance, the joint borrower, without notice to clear the arrears. Caspian complained to us that, had he known the bank could take this step, he would have found a way to clear the arrears himself. He said the acquaintance had nothing, in practice, to do with the loan or the rental property. He also said the bank failed to communicate effectively about the possible consequences of leaving arrears unpaid.

Our investigation

We reviewed the terms of the loan contract, and they said the bank could take funds in any of Caspian’s accounts or his acquaintance’s accounts to pay off an unpaid amount, and it could do this at any time and without notice. As for Caspian’s complaint that the bank failed to communicate effectively about the possible consequences of unpaid arrears, the bank was, in our view, clear in its notification about the amount overdue and the need to repay it as soon as possible and that it may take further action to recover the arrears. When, after four months, it heard nothing from Caspian about the arrears, it took a step permitted by the contract to take funds to repay the arrears.

Outcome

We suggested Caspian accept the bank's goodwill offer of $750 to resolve the dispute, which he did.