Bank entitled to enforce guarantee despite guarantor's financial difficulty

Categories:

Vulnerable customers and hardship decisions, Bank decisions, Lending,

Summary:

In March 2026, Mae complained after the bank repossessed and sold a vehicle that was security for a loan to a company where she had previously been a director. Mae had previously signed personal guarantees for that loan. After the sale, an outstanding balance remained owing. She said it was unfair for the bank to pursue her for the outstanding balance because she was not meaningfully involved in running the company, received little benefit from the loan, and could not afford to repay the debt. She also said the bank had not adequately considered her difficult circumstances and applications for hardship support, and that it had carried out the repossession improperly by retrieving the vehicle’s keys from her children while she was asleep.

Published:

November 2026

Our investigation

Mae signed a personal guarantee when the company got the loan and signed another guarantee when the loan was refinanced. The second guarantee was signed well after Mae had stopped being a director of the company, and it was therefore clear she had signed in a personal capacity. The guarantees made her responsible for paying the money the company failed to repay. We found the bank was entitled to repossess and sell the secured vehicle after the company defaulted and pursue Mae for the remaining debt under the guarantees she had signed.

We accepted that enforcing the guarantee would have significant consequences for Mae and her family. We also accepted that she was not meaningfully involved in the company’s day-to-day management. However, those circumstances did not remove her obligations as guarantor or prevent the bank from enforcing the guarantees. We found no evidence that Mae had been misled, pressured into signing or denied an opportunity to get advice before agreeing to act as guarantor.

The loan was business, not consumer, lending, so the bank did not have to assess a statutory hardship application. Despite this, the bank considered Mae’s circumstances, explained her obligations and delayed enforcement while repeatedly advising her she could voluntarily surrender the vehicle. We were satisfied the bank communicated clearly with Mae and treated her fairly and reasonably.

Mae and the repossession agent gave different accounts of what happened when he repossessed the vehicle. There was not enough evidence for us to say whose account was right, so we were unable to say the bank or its agent acted unfairly during the repossession.