Arvid’s wife complained that the bank did not properly consider other options when he struggled to make repayments and instead required him to surrender the vehicle. She also said the bank did not tell him he remained liable for the shortfall after the sale. She said he became aware of the debt only after applying for a loan elsewhere.

Our investigation

The loan application information recorded that Arvid was single, had no dependants, and had limited expenses. However, we found this information was incorrect. Arvid was married with three children and had higher expenses. We also found no evidence that the bank had verified the information recorded in the application. Rather, it had relied on information supplied by the car dealer without establishing that it was correct or that Arvid had supplied it. We therefore found the bank had not shown it made reasonable inquiries before giving him the loan. We also found it had not demonstrated that it helped Arvid make an informed decision about taking out mechanical breakdown insurance. As such, these failings amounted to a breach of its responsible lending obligations.

The bank’s records showed it set up a temporary repayment arrangement when he got into financial trouble and asked for assistance. We saw no evidence the bank instructed him to surrender the vehicle. Instead, the evidence showed Arvid told the bank he wanted to return it because he no longer had a job. The bank explained that surrendering the vehicle would not release him from the loan and that he would remain liable for any shortfall after the sale. It also advised him of other options, including hardship relief. We found the bank treated Arvid reasonably.

When Arvid surrendered the vehicle, the bank got a valuation from a specialist vehicle sales company and arranged a public auction. The eventual sale price was within the valuation range and exceeded the highest auction bid. We found the bank took reasonable steps to obtain the best price available at the time. Once the vehicle was sold, the bank sent Arvid notices about the shortfall and his repayment obligations. We found the bank communicated fairly and effectively with him.

The bank acknowledged it breached its responsible lending obligations and offered to waive all interest, fees, sale costs and the financed insurance amount. We considered this offer to be fair and appropriate.

Outcome

We upheld part of the complaint by Arvid’s wife, who rejected the bank’s offer.