Bank had to consider request for help fairly, but did not have to agree to it

Categories:

Vulnerable customers and hardship decisions, Bank decisions, Lending,

Summary:

Walter and Margot had bank loans secured by their three properties. From about April 2024, they began having difficulty meeting their loan repayments. They attributed this to reduced and uncertain self-employed income, increased living and interest costs, and periods without rental income. In July 2024, they asked the bank to postpone loan repayments, a request the bank declined because it considered their financial difficulties were not temporary, and that agreeing to a postponement would not make the lending sustainable in the long term.

Published:

October 2026

Walter and Margot complained that the bank did not properly take into account their long-standing relationship and the value of their properties. They also complained that the bank had communicated poorly, passed them between staff and required them to repeatedly explain their circumstances. They said the bank would not let them refix their loans after arrears arose, leaving them facing higher floating interest rates. They estimated the extra interest and arrears charges added between $8,000 and $10,000 to their debt. They also said the bank’s actions affected their credit position and made it difficult to refinance elsewhere.

The bank offered them $1,000 in recognition of shortcomings in its service and communication in June and July 2024. Walter and Margot considered the offer inadequate and complained to us.

Our investigation

The bank’s records showed it considered Walter and Margot’s financial position and concluded their difficulties were not temporary and so unlikely to be resolved by a short repayment holiday or period of interest-only payments. The bank was required to consider their request for a postponement fairly, and, in our view, it did so, but it did not have to agree to their request.

The couple continued to struggle with repayments for the next two years, and their arrears peaked at $78,000 in January 2026. The bank did not have to refix their loans while the loans were in arrears and the extra interest and arrears charges were in line with the terms and conditions of their lending. As such, the bank did not have to reimburse the extra interest and arrears charges.

As for their complaint that the bank did not sufficiently take into account their long-standing relationship with the bank or the value of their properties, these factors did not oblige the bank to agree to their request. The value of the bank's security was a separate matter from whether they could afford the lending. Having enough security did not show that they could meet their repayments.

After the short period of communication difficulties in June and July 2024, where they were passed between staff and required to repeat information about their financial circumstances, the bank communicated clearly and effectively about the reasons for its decisions. The lack of clear communication caused them extra stress, although better service would not have changed the bank’s decisions.

In January 2026, the bank warned Walter and Margot that it might begin formal recovery action if they did not clear the arrears on their loans. However, it failed to answer their questions about the implications for them of referring the debt to a collections agency.