Our investigation

The bank’s affordability assessment indicated there would be a monthly surplus of $110. However, the bank’s calculation included all of Mikayla’s overtime income but excluded regular payments of a tithe to their local church totalling $1,500 a month. Sergio and Mikayla said they never told the bank they would stop making these payments to their church.

The tithe was a regular and significant financial commitment, and the bank’s own policy treated tithing as such. The bank said Mikayla had indicated that the couple would stop the payments, but it could not produce a record of any conversation in which Mikayla had given such a commitment. We considered the bank had not shown it made reasonable inquiries to satisfy itself that Sergio and Mikayla could repay the loan without substantial hardship. If it had included the tithes in its assessment, the loan would have been unaffordable.

Outcome

The bank acknowledged it had not properly assessed the loan application, and that this had put Sergio and Mikayla in a difficult and stressful situation. The couple had accrued interest and fees on their loan totalling $75,700. With Sergio and Mikayla’s agreement, the bank put $31,500 of this amount towards repayment of the loan and the remaining $44,200 towards repayment of high-interest debts they had elsewhere. The bank also put $11,000 towards repaying another external debt. Together with Mikayla’s recent move to a better-paying job, this meant the couple could afford the home loan. And finally, it paid them $10,000 for the stress and inconvenience it had caused them.