The Banking Ombudsman has recently decided that a bank acted unfairly when reporting about a customer’s loan and therefore affecting his credit rating.

The customer had taken a loan out with the bank when he moved to New Zealand. The customer had always ensured that his repayments were made on time.

Years later, the customer had to temporarily leave New Zealand. He was proactive about contacting the bank about whether he could change his repayment schedule to pay at a slower rate, given he would not be in a financially stable situation.

The customer informed the bank that he needed his credit rating to remain good in order to maintain his work in New Zealand, and because it may affect any future application for a permanent visa.

The bank said that they could not let the customer pay less, but eventually told the customer to skip his next repayment. This would give one of the bank’s teams some time to look at the customer’s request.  

The customer followed these instructions, skipped the repayment and later made a repayment plan with the bank. However, the bank had reported that the customer’s loan had become overdue and therefore the customer’s credit rating declined.

The customer complained to the bank that they had not told him his credit rating would decline by skipping the payment and setting up the payment schedule. The bank refused to rescind their comments.

The Banking Ombudsman had to decide whether the bank had acted fairly.

The Ombudsman noted that the bank could pass on information to credit rating agencies about the customer and his loan repayments. However, the bank had failed to inform the agency regarding why the loan had gone into arrears.

The customer had also been very proactive in seeking a payment plan before leaving New Zealand and had made it very clear to the bank that he was concerned about the repayments affecting his credit rating.

The Ombudsman accepted the customer’s evidence that he would have gotten help from his family if he knew the payment schedule would affect his credit rating.

The Ombudsman decided that the bank should have “clearly and specifically” told the customer that his loan would show as overdue until his repayments were made in full. The Ombudsman accepted that this was a failure by the bank, and they needed to have informed the customer sufficiently before offering the customer to skip his repayment.

The bank agreed to correct the customer’s credit rating, as well as pay him $3,000 in compensation for the stress and inconvenience that the situation caused him.

It is important to be aware of your rights and obligations as a customer. If you believe you have been treated unfairly, it pays to seek advice from a professional with experience in the area.

Leading law firms committed to helping clients cost-effectively will have a range of fixed-price Initial Consultations to suit most people’s needs in quickly learning what their options are.  At Rainey Collins we have an experienced team who can answer your questions and put you on the right track.

Alan Knowsley and Hunter Flanagan-Connors