Loan restructure for benefit of family and in line with bank’s responsible lending obligations

Categories:

Vulnerable customers and hardship decisions, Bank decisions, Lending,

Summary:

In 2007, Pauline and her husband took out a joint home loan of $105,000 to refinance a $100,000 loan at another bank and to give them $5,000 for home improvements. In 2008, Pauline sought a credit card limit of $10,000. The bank approved the application, and in 2010 the credit card debt was added to the home loan. In 2016, the couple changed the loan to interest-only payments for five years. Soon after that term ended in 2021, Pauline’s husband died. In March 2024, the bank agreed to restructure the remaining debt of $93,000 into a two-year, interest-only term.

Published:

February 2026

In October 2025, Pauline's son, Luke, who had enduring power of attorney over her funds, complained that the bank had breached its responsible lending obligations in three ways: first, by approving the original home loan in 2007 despite his mother's advanced age and foreseeable reliance on the pension; second, by approving the credit card limit and adding the card debt to the loan in 2010; and third, by restructuring the loan in 2024 despite Pauline’s poor health and financial vulnerability. Luke wanted the bank to write off the remaining debt.

Our investigation

Our terms of reference do not allow us to consider complaints about the actions of a bank that a customer had known about more than six years ago. We could therefore consider only the bank's actions in 2024 when it restructured the loan into a two-year, interest-only term and whether those actions were in line with its responsible lending obligations.

We found the bank had met its obligations. The restructure did not involve any extra debt. The bank had worked closely with the family and clearly communicated the available options. The interest-only restructure gave the family extra time to consider its position following the death of Pauline's husband and in light of her vulnerable circumstances. Finally, Luke himself had agreed to the restructure.