Ombudsman – Bank and customer reach agreement to avoid forced sale as financial hardship complaints rise

A communication breakdown between a bank and a customer has been resolved with an agreement giving the customer the chance to avoid a forced home sale.

The case features in the Banking Ombudsman Scheme’s latest annual report, which shows a 55 per cent rise in hardship complaints compared with the previous year. Many of the complaints involved customers who had reported concerns about responses from banks to their requests for help, mostly with repaying home and vehicle loans.

In the case detailed in the annual report, the customer fell behind with his home loan repayments after a back injury left him unable to work. Despite clearing his arrears by the bank’s deadline, confusion over requirements for switching to a lower fixed-rate interest rate led to mounting frustration on the customer’s part.

He believed he could fix his interest rate once his arrears were cleared, but the bank said it would first need to monitor his repayments for 90 days. He said that, had he known about the waiting period, he would have used the money differently.

The customer became frustrated with the complaint process and made abusive comments towards staff. This prompted the bank to take steps to close his accounts – a move that would have left him struggling to find another bank to lend to him, given his arrears history.

Banking Ombudsman Nicola Sladden said the case highlighted the importance of clear communication when customers got into financial difficulty.

“Even though most banks have specialist hardship teams to deal with such customers, there are still opportunities for them to improve their processes, particularly how they communicate their decisions.”

Under an agreement facilitated by the scheme, the bank gave the customer up to $4,000 towards home renovations to prepare the house for sale, plus a $500 goodwill payment. The customer agreed to make small weekly repayments in the meantime.

“This outcome enabled the customer the chance to avoid a mortgagee sale, and it also clearly demonstrated the benefits of taking a collaborate and flexible approach towards a customer in financial difficulty,” said Ms Sladden.

Ms Sladden urged customers either in or facing financial difficulty to contact their bank as early as possible because more options would be available to help them get out of trouble.

“As customers’ financial difficulties deepen, the fewer options a bank has to help.

For their part, banks should have a straightforward process for responding to customers who reach out for help.”