Bank acted reasonably when declining lending during period of no income

Categories:

Bank decisions, Lending,

Summary:

In October and November 2025, Jake asked the bank for a personal loan and a temporary overdraft because he was in financial difficulty. The bank declined both applications. Jake said the bank relied on incorrect information, formed subjective views about his account activity, and did not make reasonable inquiries about his ability to repay the money.

Published:

March 2026

Our investigation

We looked at the bank’s assessment of Jake’s applications. Jake met bank staff on 20 October 2025 to discuss his short-term financial difficulties. On 22 October, the bank told him he did not meet its lending criteria and suggested he seek help from Work and Income New Zealand or a financial mentor.

Jake applied online for a $3,000 personal loan on 9 November. The bank reviewed his credit record and monthly balances and declined the application on 11 November because it was not satisfied he could meet repayments. The bank tried to call him on 11 and 12 November. In the second call, Jake said he expected a long service leave payment at the end of the month and intended to repay the loan quickly. The bank asked for evidence of this payment and a previous payslip, which Jake provided.

The bank reassessed the loan and considered whether a temporary overdraft was possible. On 18 November, it told Jake it had declined both applications. It said it was concerned about recent transactions and how he managed money in his account. The bank later acknowledged it had mistakenly interpreted some of the transactions as gambling-related and apologised. Its records showed the main reasons for declining the applications were the lack of verified future income and account conduct that did not meet its lending criteria. On 19 November, the bank declined Jake’s request for a $9,450 temporary overdraft because it considered such an overdraft too risky.

Jake said the bank did not fully consider his financial position. He said his previous income and accrued leave showed he could repay the money. However, the bank did not have to offer him further credit simply because he was in financial difficulty. The bank was, however, obliged to act as a responsible lender. We found Jake was unable to demonstrate stable future income at the time of his applications, and so the bank could not be satisfied he could afford the repayments. Jake told us he considered he had been disadvantaged because he was a whistleblower, but it did not appear to us, from the evidence available, that the bank treated him less favourably than it would have treated anyone else in much the same circumstances.