The Banking Ombudsman has found that a customer who borrowed from the bank ended up being liable to the bank for loans made to other customers.  This came about because the customer guaranteed the loan to a company which they had formed with friends to buy investment properties.  As part of a loan to the company each owner was required to sign a guarantee of payment of the loans to the company, but also guaranteeing payment of loans to any of the owners of the company.

Unknown to the customer some of their friends took out other loans from the bank for properties unrelated to the shared investments.  When those friends could not repay those loans the bank called upon all guarantors to pay the loans of the customers, even though the customers had nothing to do with the loans, were not aware of them and did not share in that borrowing.

You need to be very careful when signing up to guarantee a loan that you are not guaranteeing loans unrelated to you by other customers.  Read the fine print very carefully to understand exactly what you are agreeing to when guaranteeing a loan.

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