Joint ownership: a cautionary tale
The case of a woman who had a possible mortgagee sale sprung on her because of her ex-partner's debts has prompted the Banking Ombudsman to call for changes in consumer credit law.
Wednesday, November 24th 1999, 12:00AM
by Paul McBeth
The case of a woman who had a possible mortgagee sale sprung on her because of her ex-partner's debts has prompted the Banking Ombudsman to call for changes in consumer credit law.
The circumstances: the bank held an all obligations mortgage over the house owned by the woman and her former partner to secure a housing loan and a small personal loan to both of them. They separated in May 1994 and she stayed in the house with her five children.
However, this April, the bank served her with a notice of demand claiming repayment of an $14,000 overdraft in her ex-partner's name, which he'd defaulted on. Even though she didn't know about the overdraft, she was now faced with a possible mortgagee sale as it was secured by the mortgage over the house.
In her latest newsletter, Banking Ombudsman Liz Brown says that further lending to one party only against the security of a jointly owned family home over which a bank holds an all-obligations mortgage "is one of the few areas where the disclosure obligations of the bank are not entirely clear and may need some amendment".
"It is clearly good banking practice to ensure that the other party is at least aware of the further lending and consents to it," she says.
The result: following an investigation by the Banking Ombudsman, the bank accepted that it had not followed its own practice guidelines and should have told the woman about the overdraft and its implications.
The sting in the tail, however, was that after some to-ing and fro-ing she still had to accept responsibility for $5,000 of the overdraft (added to her housing loan). The bank agreed to chase her ex-partner for the rest.
Brown says that a number of people that approach her office report that their grievances - legitimate or not - have been made worse by poor service from their bank. She says one area where banks could make a start is by not sending advertising material to customers who have a 'fragile' relationship with them and especially not to those people against whom they're taking, or about to take, recovery action.
"Many complainants who have a grievance against their bank have commented that it is supremely irritating to receive advertising material addressed to them as 'valued customer'."