Bank had discretion about whether to enforce repayment of cash contribution

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Bank had discretion about whether to enforce repayment of cash contribution

Categories:

Concerns about lending decisions,

Summary:

Idris had a home loan that was nearing the end of its fixed interest period, so he emailed the bank to ask what interest rates it was offering. He did not receive a response for nearly a month despite numerous follow-up emails. By the time he did, he had already decided to refinance elsewhere. When he informed the bank, it said he would have to repay the $1,500 cash contribution it had given him when he took out the loan.

Published:

April 2024

Idris said this was unfair because he was only three months from the end of the three-year period during which the bank could recover the cash contribution. He also pointed out the delays he had encountered when trying to refix his loan.

Our investigation

The contract between Idris and the bank did provide that the bank could recover the full $1,500 contribution if Idris took his lending to another bank within three years of taking out the loan. The contract said the bank “may” recover the contribution, that is, the bank had the discretion to recover part or all – or none – of its contribution. Idris’ maintained the bank should have had a clear policy describing when it would or would not seek reimbursement for a cash contribution. We did not agree. The bank was entitled to decide on a case-by-case basis whether to seek reimbursement of a cash contribution. There was nothing in the contract requiring the bank to have a policy to govern its decisions. The bank was entitled to demand that Idris repay the entire $1,500 cash contribution. However, we recommended the bank pay Idris $200 as compensation for the inconvenience caused by its delay in responding to his emails.