We receive a number of complaints about banks' lending decisions. What might be surprising is that we receive complaints about banks both refusing to lend and allowing customers to borrow when the customers say they could never have afforded the repayments.
From time to time banks offer deals that encourage people to transfer the debt on their credit card from their existing bank to another one at a low interest rate. We often get complaints from people who do not understand how credit card balance transfers work or who do not understand the conditions banks may attach to their offers. Balance transfers usually involve two banks – the bank you have the original debt with and the bank you are transferring the debt to.
Why do lenders charge early repayment costs? Can my lender tell me how much the early repayment cost will be when I take out the loan? View this quick guide for answers to these questions and more.
Sometimes a bank will only provide credit to a customer if someone else provides a guarantee. If you agree to be a guarantor for a borrower, the bank can require you to pay the borrower’s debts if they default on their repayments.
Lending-related complaints the Banking Ombudsman Scheme investigates are usually covered by consumer credit contracts legislation. This legislation has recently been updated, with the main changes made to the Credit Contracts and Consumer Finance Act 2003. The Act now places specific legal obligations on lenders – those who provide credit – including banks.
Home loans are commonly referred to as mortgages, but a mortgage is actually a charge over a property. When a bank lends money, it requires security against a borrower’s failure to repay the money. The borrower grants the bank a mortgage over his or her property. If the borrower repays the debt secured by the mortgage, the mortgage is discharged. If not, the bank can sell the property to recover the money it is owed. This is called a mortgagee sale.
An overdraft gives a customer access to more money than is actually in his or her account. An overdraft facility can be arranged or unarranged.
Loan-to-value ratio (LVR) restrictions on bank home loan lending were introduced in October 2013 by the Reserve Bank of New Zealand to slow housing-related credit growth and house price inflation, and to protect the financial system.
When you sell a property with a mortgage, you can usually keep whatever money is left after repaying the bank loan (unless, of course, you transfer the loan to another property you’ve bought). Things are less straightforward, however, if the mortgage acts as security over more than one loan. In that situation, banks won’t automatically let you keep the entire balance. That’s a source of complaints, as this guide explains.