Can a bank just cancel a bond agreement if they think that they lent recklessly?

[Liz1]

I have a bond (bond A) that was obtained post NCA (2009) which as far as I can tell could constitute reckless lending.

At the time of application I revealed to the bank that I had a suretyship elsewhere, which would technically mean that by giving me this bond, that they definitely extended credit recklessly.

I recently again applied for credit with this same institution which was denied. I asked why and they cited the suretyship. I pointed out that this suretyship didn't pose a problem when obtaining bond A. They are now looking into this.

I am comfortably servicing bond A.

My question is: If the bank realizes that they shouldn't even have given me Bond A, and that it could technically constitute reckless lending, can the bank come back two years later and cancel bond A (thereby forcing me to settle the full balance, which I obviously could only do by selling the property)?

I don't want to sell the property, am affording it, and have no intention of pursuing a reckless lending case against them.

The suretyship cannot be released at this stage.

[Dave A]

You'd have to default in terms of the agreement to provide grounds for termination of the bond. Ordinarily that would be by defaulting on payments due... but sometimes credit agreements refer to other judgements against the debtor as being grounds for termination - so be careful.

If the bank realizes that they shouldn't even have given me Bond A, and that it could technically constitute reckless lending, can the bank come back two years later and cancel bond A

If they did, they'd be predjudicing themselves - so I suggest it's highly unlikely. If they did have cause to cancel bond A, the last thing they'd do is strengthen an argument for reckless credit extension. I think it's safe to say they'd be doing all they could to argue against such a motion. IMO, you having made it through two years since pretty much settles the reckless credit angle already.

If your concern around bond A arises from them declining further credit extension, ultimately it's a seperate judgement call. The bank is saying they aren't prepared to commit themselves further, and that does not automatically imply that they made a mistake the first time around.

[Blurock]

I Agree with Dave A. The chances are slim that the bank will call up the bond, implicating themselves. You do have various defence options if they do. Unless you default, there is little that they can do.

[Liz1]

That's good news. I suddenly realized that they could however cancel my access facility as I have extra funds in the bond. So I have removed the funds for now until I gain clarity as to what is going on with them. My credit record is clean clean clean. Not only is my credit record clean, but I have on record many credit agreements in the past that have all being timeously paid and ultimately settled in full. So I think that it is OK. Just looking for a place to put the balance of my access bond that earns me interest that approaches 7.0% (my bond rate). Any ideas anyone?

[mbsmit]

Hi there,

Perhaps lied in application and they found out? Otherwise no.

Regards,
Mr Smit