Bank took all reasonable steps to get best price on sale of assets

Categories:

Bank decisions, Lending,

Summary:

Terrence and Laverne had a loan secured by a mortgage over their house, and their company had loans secured by assets and by their personal guarantees. In early 2024, the company went liquidation, and the bank repossessed and sold the assets that secured the company’s lending. The sale left a shortfall of $50,000 owing to the bank. The bank asked Terrence and Laverne to pay the shortfall as guarantors. They did not have the money and applied to have the shortfall added to their home loan. However, the bank rejected the application. They complained that the shortfall only arose because the bank undersold the assets.

Published:

June 2025

Our investigation

We could not consider their complaint on behalf of the company because its liquidation meant they had no legal standing to bring a complaint. However, we could consider complaints in their personal capacity. Because Terrence and Laverne had personally guaranteed the company’s debts, the bank was obliged to take steps to get the best price it could reasonably obtain when selling the assets. The bank had engaged an auction specialist to value and advertise the assets for sale, and these steps discharged the bank’s obligation. The assets sold for what the market was willing to pay on the day of the auction, which was higher than the valuation estimate. There was nothing to suggest the bank or its agents had acted wrongly during the repossession.

We found the bank had breached no obligation to Terrence and Laverne in declining their application to add the shortfall to their home loan. A bank must approve a loan application only if satisfied the customer can afford it. Terrence and Laverne had other debts totalling $90,000 and reduced income. Terrence had started a new business but had limited information about the income it was generating, and Laverne’s only income came from ACC.