better banking

Case - 49529

2016 - 2017


Property lending


Mr. J’s bank offered him a $3,000 cash incentive to take out a home loan. A condition was that he repaid the incentive if he moved banks within two years. Mr. J accepted the incentive and took out a loan.

Five weeks later, he asked for another loan to buy a second house. He found the second application more difficult. He was also unhappy that other banks were offering better interest rates than the one he had just accepted.

At a meeting with his bank, he was told there would be no early repayment charge if he broke his loan early, merely a $100 administration fee. He subsequently passed on this advice to another bank he had decided to move to. It drew up documents to move his loan. It also agreed to lend him money to buy the second house.

On settlement day, Mr. J’s existing bank told him he had to repay the $3,000 cash incentive. He did so, but complained that at his meeting with the bank, he had told the bank that he wanted to refinance and asked for the total cost of doing so. The bank had not mentioned the cash incentive in its estimate, and he believed the bank should be bound by that estimate.

The bank replied that Mr. J hadn’t said he was thinking of refinancing with another bank and had asked only that it beat a competitor’s rate. Therefore, it gave its estimate on the basis that he remained with the bank, and simply broke and refixed his fixed-rate loan. The bank said it would have referred him to a personal banker if it knew he wanted to switch banks. It would also have warned him that he would have to repay the $3,000 cash incentive if he switched. 

In trying to determine what was discussed at that meeting, we considered the following:

Mr. J had originally agreed to repay the $3,000 if he moved banks within two years – and he had moved banks within weeks of taking out the loan

the bank’s estimate related to early repayment charges only, and said nothing about the total cost of refinancing with another bank

after his meeting with the bank Mr. J supplied information in support of his loan application and continued to ask about the possibility of a loan

Mr. J’s new bank did not approve his loan until two weeks after the meeting with her existing bank

in an email the new bank had told him to ask his existing bank for a statement of his current loan, not the total cost of refinancing. 

The information suggested that at the time of her meeting with the bank, Mr. J was exploring his options but had not made a definitive decision to switch banks at that time. Therefore, we were not persuaded that the bank provided inaccurate information or ought to have included repayment of the cash incentive in their discussions about changing his loans.