Our investigation

The bank had considered a request for hardship support when Ellen broke her foot, but did not agree to it because it was not satisfied that Ellen would be able to afford the loan after a period of hardship support. The bank’s notes showed Ellen had not had a stable income before she broke her foot, and that her inability to meet repayments was not caused by the broken foot or short-term hardship. Rather, the notes showed Ellen had been struggling since 2022 to make repayments, and had relied on benefit payments, casual income and help from family members.

The Credit Contracts and Consumer Finance Act 2003 allows borrowers who cannot reasonably meet repayments because of an unforeseen event to ask their lender to change the loan contract to enable them to meet their repayments. Lenders must consider such requests, but do not have to agree to them. Relief is intended for short-term hardship, and a bank needs to be satisfied that the borrower will be able to afford the loan after short-term support. In short, the bank was not obliged to provide the hardship assistance Ellen sought.

The bank’s conditions for adding the arrears to her loan balance were aimed at avoiding a mortgagee sale, and in our view were reasonable.

Outcome

We explained our views to Ellen, and she accepted the bank's conditional offer to add the arrears to the loan.