Bank failed to look into benefit payment before approving vehicle loan

Categories:

Bank decisions, Lending,

Summary:

In July 2023, the bank approved a loan for Lynne to buy a $26,000 vehicle. Lynne, a solo mother on a low income, said she had struggled from the very beginning to keep up repayments. She had numerous debts when she applied for the loan, and she complained that the bank had failed to meet its obligation to lend responsibly. Had it done so, she said, it would never have approved her loan application.

Published:

January 2026

Our investigation

Using the information in the bank’s lending file, we carried out our own assessment of whether Lynne could have serviced the loan. We found it was not possible because her outgoings exceeded her income. In short, the loan was not affordable at the time the bank approved it. The bank disagreed with our higher assessment of living costs, but it agreed that it should have looked more closely into one of her two benefit entitlements she was receiving, and which made up part of her income. Had it done such a check, it would have found one of her two entitlements were to end before the bank approved the loan. The lending was unaffordable without this benefit payment.

Outcome

The bank offered to refund all interest, default interest and fees charged to the loan, along with $2,000 compensation for the inconvenience it had caused her, and also to remove her adverse credit rating – a total package of $5,500. Lynne accepted the bank’s offer.

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