Bank satisfactorily made customer aware of implications of giving guarantee

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Bank satisfactorily made customer aware of implications of giving guarantee

Categories:

Guaranteeing someone's debt,

Summary:

In January 2015, Ramona gave a guarantee for a home loan agreement entered into by her daughter Kate and her daughter’s partner, Brendan. She also provided mortgage security for the home loan over her own property. Ramona died without a will, and her other daughter, Rhonda, and her son were appointed administrators of her estate. Ramona’s property was her estate’s main asset. While administering the estate, Rhonda became aware of the guarantee and associated mortgage security. She complained that her mother would not have understood what she was agreeing to when she provided the security, and that the bank should not now be able to call on the security when Ramona’s property was sold. Rhonda also complained about delays in receiving Ramona’s bank statements going back to 2015.

Published:

April 2025

Our investigation

Banks are required to make intending guarantors aware of their obligations, including that they might be liable for the debt, and to tell them to seek independent legal advice beforehand. The bank required Ramona to get independent legal advice before giving the guarantee and entering into the home loan agreement. The solicitor confirmed to the bank that he had explained the nature, effects and practical implications of the guarantee to Ramona, that Ramona confirmed she fully understood, and that she wished to proceed and signed the guarantee voluntarily. We were satisfied that the bank met its obligations. At the time, Ramona was retired and in debt herself. However, there was no requirement at the time on the bank to undertake an assessment of her ability to afford the guarantee.

As for the delays in receiving Ramona’s bank statements, Rhonda had initially contacted the bank in her capacity as a concerned daughter, but the bank’s privacy obligations meant it could not agree to her request. Once advised of Rhonda’s appointment as estate administrator, the bank acted in a reasonably timely way. The bank acknowledged that the delay had been frustrating and offered a goodwill payment of $900.