Bank refunds interest after failing to explain policy effectively

Lending restrictions,
In May 2022, Emerita received a letter from her bank saying her fixed interest rate was about to expire and she should contact the bank to refix it. She did so and was surprised to be told she was ineligible for a fixed interest loan because she was living in the United Kingdom. The bank said the policy had been introduced in 2017. This confused Emerita because she had moved to the United Kingdom in 2016, and had subsequently refixed her home loan four times.
June 2024

The bank said it had failed to see her overseas address and should not have allowed the refixing to happen. Emerita said the loan was not in her name but that of the family trust. The trust was a New Zealand resident trust, and it had an independent trustee, Emerita’s sister, who was still living in New Zealand. The bank said this was not enough – if Emerita wanted to fix the interest rate, all the trustees had to be living in New Zealand. Emerita considered the bank's policy unfair and complained to us.

Our investigation

Banks are under no obligation to offer fixed interest loans to customers. They can stop offering fixed rates to all customers or to customers in certain circumstances. In changing what they offer, however, they must treat customers fairly and reasonably and communicate the changes effectively. We found the bank had given Emerita inaccurate information. Its policy did not require all trustees to be in New Zealand, rather only one, and that one trustee could give the bank instructions to fix the interest rate. Had the bank explained this to Emerita, she could easily have appointed her sister as an authorised signatory to refix the rate.


The bank agreed to refund $5,000 in interest that Emerita paid because she had been unable to fix the interest rate for her loan.

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