Bank properly informed customer of the fixed rate term

Categories:

Lending, Fees, charges & rates,

Summary:

In 2020, Clara’s bank approved a loan to buy a rental property. In September 2024, she sold the property and repaid the loan. The bank charged her an early repayment fee of $34,067. Clara complained that she had intended to refix the loan on 17 October 2023 for 12 months – not 60 months – and that the bank had failed to take sufficient care in the process of refixing the rate on the bank’s mobile banking app, and in communicating the refixed rate she had chosen. She later also complained that the bank should not have approved the loan because it was unaffordable.

Published:

October 2025

Our investigation

The bank’s records showed that on 17 October 2023, Clara used her mobile banking app to select a 60-month term at 6.55 per cent. A pop-up message appeared warning her that breaking the term could result in an early repayment fee. Clara confirmed her selection by pressing “accept and submit”. The bank sent a confirmation message to her app and online banking, as well as a letter confirming the refix (a letter she said she did not receive). She did not use the time between 17 October and 13 November (when the new term took effect) to notify the bank of any error. In fact, she made no contact at all with the bank during that period. The bank’s terms and conditions said it could charge an early repayment fee if she broke the fixed term.

When the property was sold in September 2024, Clara asked for a breakdown of how the bank had calculated the fee. The bank did not respond. In December, Clara wrote saying it had been three months since she had made her request and had still not received a response. The bank offered $2,000 in recognition of its poor communication.

We also investigated whether the loan had been affordable when the bank approved it in 2020. The low repayments and the size of the income generated by the rental home indicated to us that the loan was affordable and that the bank had met its obligation to offer credit only if satisfied it was likely a customer could make repayments without substantial hardship.