Understanding the terms and conditions of your financial agreements

Key Learnings:

• Be sure to understand the exact requirements of your loan repayment plan.
• Thoroughly review your bank statements so that you remain up to date on all account activity.
• When you sign a Personal Credit Agreement, you acknowledge receipt of and agree to be bound by the terms and conditions contained in that Agreement.

In January of 2014, Mr. G signed a Credit Agreement when he obtained a mortgage of $122,000 and a Line of Credit (LOC) of $39,600, both secured by a property he owned and planned to rent out. The monthly payments were $1,255 for his mortgage, which he had automatically debited from his bank account, and $43 for the LOC.

Although Mr. G was making payments on his LOC, they were not regular. Instead of paying the $43 monthly payment, he would pay $1,000 or $2,000 every few months. In January of 2015, Mr. G received a letter from the bank informing him that his LOC had been closed. Shortly afterwards, Mr. G found out that the bank had also cancelled his mortgage and he was also now in foreclosure. He then realized that the bank had stopped debiting his account for his mortgage payments four months prior because he had missed multiple consecutive monthly payments on his LOC.

Mr. G was referred to the bank’s lawyers who informed him of his total debt owing, which included the four missed payments and an additional $8,636.49 because he was also responsible for the legal fees associated with his foreclosure. Mr. G stated that he had made a lump sum payment on his LOC thinking that it would cover the next few monthly payments of $43. He did not realize that he had to make at least the monthly minimum payment to remain in good standing. He also said that although he was receiving monthly statements, he did not look at them.

Mr. G came to OBSI for help. Our investigation found that each time the bank did not receive payments by the Payment Due Date, the statements sent to Mr. G showed an amount under “Current minimum payment”, another one under “Overdue – Please pay now”, and a message indicating that the account was overdue. We also found that both the bank and a collections agency tried unsuccessfully to call Mr. G on different occasions. A letter informing Mr. G that the LOC had been closed was sent to him and he confirmed receiving it but did not check to ensure his mortgage payments were still being withdrawn from his bank account despite the issues he faced on the LOC. 

The documents provided to OBSI showed that at the time Mr. G signed the Credit Agreement, he agreed to be bound by the terms and conditions contained in the Agreement, the Disclosure Statements and in the Companion Booklet he received. The Agreement was clear that he was required to make monthly payments on the LOC on or before the Payment Due Date indicated on the statements and that failure to do so on any loan, credit or security agreement would be considered default on all agreements. The Agreement also stated that should collections proceedings be required he would be responsible for any fees incurred. As a result, OBSI had no grounds to hold the bank responsible or to recommend that it reimburse Mr. G for legal fees he incurred.

Mr. G could have avoided his losses and the foreclosure on his property by understanding the terms of the agreement he entered into with the bank, and by reading the statements and letters that were sent to him. As a bank client you are responsible for understanding your agreements, maintaining your accounts, and making minimum payments. It is up to you to ensure any automatic payments are being regularly withdrawn.

This complaint was not upheld.

(2016)