better banking

Case - 49698

2016 - 2017

Lending

Property lending

Mr G approached his bank to discuss selling his property and buying two more. The bank said Mr G would need to give it updated financial information before it could consider an application. Mr G then signed agreements to sell his property and buy two more. Both purchase agreements were conditional on getting finance.

Mr G went back to the bank, which said it needed more information before formally considering a loan application. Mr G then confirmed one purchase agreement.

Mr G approached the bank on the day his second purchase agreement was due to go unconditional and requested funds to pay the deposit. Despite not having completed or considered his application, the bank gave him a temporary overdraft on the basis that he would have to repay it from the proceeds of his existing property. Mr G then confirmed the second purchase agreement.

Mr G gave the bank the extra information several days before settlement. The bank noted that his financial position was not as he had described it, and also that his credit report showed several recent defaults. On this basis, the bank declined his loan application.

Mr G complained to us, saying the bank agreed to provide finance but failed to do so. We reviewed his correspondence with the bank and found no evidence the bank had agreed to provide finance. It had made clear he would have to supply further information before it could consider his application. Lacking the assurance of finance, he therefore had no basis for confirming the purchase agreements. Thus, we could not uphold his complaint.

We noted there was a risk for a customer in confirming a finance condition before a bank had formally considered an application.  We thought the bank should have made it clear that providing the overdraft to pay the deposit did not mean his home loan application would be approved.  We suggested the bank review its practice in light of this.