Bank acted fairly in dealings with customer in financial hardship

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Bank acted fairly in dealings with customer in financial hardship

Categories:

Hardship and financial difficulty, Concerns about lending decisions,

Summary:

Vivian got a $176,000 home loan in 2015. The term of the loan was 30 years. In 2017, Vivian began missing repayments. She reached an agreement with the bank to clear the arrears but failed to follow through, and six months later the bank agreed to add the arrears to the loan balance, which by then stood at $177,000. The bank also extended the term of the loan, which was down to 28 years, back to 30 years to keep repayments the same (about $460 a fortnight). Six months later, she began missing repayments again. Over the next four years, Vivian's loan was mostly in arrears. In November 2022, Vivian began working with a budget adviser and resumed regular repayments. These did not, however, clear the arrears, which had grown to $10,000.

Published:

January 2025

The budget adviser complained to the bank on her behalf that it had failed to help her through her financial hardship, in breach of its responsible lending obligations. It was obvious, the adviser said, that the bank should have adopted a different approach to recovering the debt. He also said the manner of one staff member in contact with Vivian had caused her great stress, to the point where their interactions had affected her health. He asked the bank to write off the arrears and restructure the loan at a lower interest rate. He also asked the bank to compensate her for the stress and inconvenience caused by her interactions with the bank. The bank refused, but said it would consider restructuring her loan if she supplied information about her financial situation, along with transactional accounts held with another bank. The adviser asked us to investigate.

Our investigation

We found the bank had complied with its responsible lending obligations and had taken reasonable steps to help Vivian using the information available to it. When Vivian told the bank she had lost her job, it told her she could apply for financial hardship assistance. On at least four occasions, it gave her forms to complete, but she never returned them. At one point, the bank decided to close her loan account after she threatened to shoot a staff member. However, it soon realised she wouldn’t be able to get a home loan with another bank and resumed trying to find a way to help her clear her arrears. It eventually issued a formal demand for the arrears, but halted this action when the adviser made the complaint.

There were no recordings of the calls between Vivian and the staff member about whom she complained, but we were able to read their exchange of emails. These did not support her allegation about the staff member. The emails revealed Vivian was actually comfortable communicating with him and very appreciative of his help. Some of the staff member's emails were firm in tone, but it was fair and appropriate for the bank to be clear with Vivian about her arrears and the consequences of not clearing them. We found the bank had treated Vivian fairly and reasonably and did not do anything to contribute to the stress she felt at being in financial hardship and possibly losing her house.