Bank not to blame for customer’s finances or house woes

Categories:
Concerns about lending decisions,
Summary:
Lola had a home loan and also ran a business. Her business suffered as a result of the COVID-19 pandemic. By early 2023, she had to close the business and was unable to keep up with her home loan repayments. Lola complained that the bank was responsible for her situation. She said she had wanted to sell the house in early 2021, to repay all her lending, but the bank talked her out of it, instead encouraging her to apply for a top-up to her loan for repairs and improvements to the property, but then delaying consideration of her application and eventually declining it.Lola had a home loan and also ran a business. Her business suffered as a result of the COVID-19 pandemic. By early 2023, she had to close the business and was unable to keep up with her home loan repayments. Lola complained that the bank was responsible for her situation. She said she had wanted to sell the house in early 2021, to repay all her lending, but the bank talked her out of it, instead encouraging her to apply for a top-up to her loan for repairs and improvements to the property, but then delaying consideration of her application and eventually declining it.
Published:
November 2024

Lola complained that, but for the bank's advice in early 2021, she would have sold her house and got a good price. Instead, she had been forced to live in a home that had deteriorated to the point of being unsafe, requiring significant roof and electrical repairs.

Our investigation

We found no evidence the bank had advised Lola against selling her home, or otherwise prevented her from selling it. Rather, the bank’s records showed that in early 2021 she made clear she wanted to keep the property and had a five-year plan to fix it and get out of arrears. However, we found the bank took no action on her loan application, lodged in July 2021, for nearly five months and failed to update her about its progress – in breach of its obligation to communicate with Lola clearly and effectively. Although undoubtedly stressful for Lola, this failing made no difference to her situation because she lacked the income to meet the terms of the extra lending. Lola believed the bank could have approved the lending on interest-only terms, but it had no obligation to do so, and could lend to her only if satisfied she could afford it over the life of the loan. Furthermore, in 2023, the bank approved lending for urgent roof repairs on an exceptional basis.

Outcome

The bank offered $1,000 compensation in recognition of the stress and inconvenience caused by the delay in processing her loan application. Lola accepted the offer.

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