All Topics / Finance / Bank is playing silly buggers with guarantees; Can You Help Please?

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  • Profile photo of yiannionlineyiannionline
    Join Date: 2012
    Post Count: 1

    My bank has decided to send me a nasty letter recently regarding a property i have.


    i bought property A in own name in 1998 setting up a line of credit, then i sold prop A and bought property B in 1999; maintaining line of credit set up in 1998, with property B as security for the line of credit.

    then in 2002 i sold property B to a trust with corporate trustee; where i am director of trustee company; maintaining line of credit set up in 1998.

    as far as i was concerned all necessary paperwork for this to occur was done in 2002.

    if there was something that may have been missed, it is not my fault but the banks responsibility; further i should not be made to suffer now if they had overlooked something at the time

    now bank sends me letter telling me that trust has not gone as guarantor, as such in breach of something called national credit code
    and that i cannot keep line of credit in my name;

    The National Credit Code is Schedule 1 of the National Consumer Credit Protection Act 2009 which is after Chapter 7 of the Act.

    Then information relating to Guarantees can be found in Part 3 (Related Mortgages & Guarantees) – Division 2 (Guarantees) of the National Credit Code

    Questions I need some help with are…..

    1) if bank did not get it right initially can they be nasty now retrospectively with legislation that did not come into being until many years later.

    2) given the national credit code, does it apply for already existing loans, or is there some other existing legislation that past loan may have had probs with?


    3) if the guarantee is from a related party, such as this instance, would this not mean that guarantee issues not really relevant, under the national credit code? (or am i missing something here?)

    thanks again


    Profile photo of Mick CMick C
    Join Date: 2010
    Post Count: 1,099

    Very simple…the bank has the right to close off any remaining credit or lower the limit on your LOC when ever they like, standard terms and condition of most if not all LOC that i have seen -happy to be proven wrong.

    P.s that’s why im more of a fan of the good old I/O split with an offset..but LOC has it’s place.


    Mick C | Shape Home Loans
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    Same Banks. Better Rates. Served With a Passion.

    Profile photo of TerrywTerryw
    Join Date: 2001
    Post Count: 16,213

    Does the bank specify a clause in the NCC which prohibits this?

    What you have done is use a property you don't own as security. You are a director of a company which is a trustee. So you have various legal obligations and duties both in relation to the company and to the trust. The trustee has allowed you to use the trust property – but does the trust deed allow you to do this? If not, then you have breached your fiduciary duties as director of the trustee company.

    What was the money used for? Trust related? Did the trust pay for the property when purchased from you?

    Terryw | Structuring Lawyers Pty Ltd / Loan Structuring Pty Ltd
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    Lawyer, Mortgage Broker and Tax Advisor (Sydney based but advising Aust wide)

    Profile photo of v8ghiav8ghia
    Join Date: 2005
    Post Count: 871

    Back in 2002 you would have had to either change the loan ownership name/entity, or have singe a guarantee and indemnity. So if you did neither, (or worse failed to notify then bank!!!) then they are well within their rights so it is no use being obstinate about it. THat said, normally, a lot of this stuff only gets pick up if you are trying to get another loan, or an increase or somehow changin something with your facilities.
    What is your sore point? Are their cost involved? Or is it that abruptnes of a generic letter (some can be sutble as a sledgehammer) Why not contact your banker to discuss and get clarification.


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