Loan Tip: A Lender’s right to combine accounts

Discussion in 'Loans & Mortgage Brokers' started by Terry_w, 8th May, 2020.

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  1. Terry_w

    Terry_w Lawyer, Tax Adviser and Mortgage broker in Sydney Business Plus Member

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    Borrowers rarely read their contracts with lenders, but generally there will be clauses which allow a lender to combine accounts – savings and/or loans – with that lender. I have never seen it happen, but the borrowers are contracting for the possibility of it happening.

    Also, Clause 19.1 of the Code of Banking Practice states:

    “We will inform you promptly after exercising our right to combine your accounts.”

    That’s right – after they do it they will tell you – promptly too! By then the tax nightmare will have already started.


    Example

    Homer has been debt recycling and has 6 loans of $20,000. All 6 loans relate to different purposes. Dodgy Bank is seeking to save themselves costs and combine all 6 loans into one large one – it will make it easier to manage says their letter issued after this happens.



    Marge also has some loans and some offset accounts with cash in them. The Dodgy Bank takes her offset money and applies it to the loans, after it consolidates them. They have reduced Marge’s non-deductible debt.
     
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  2. Pier1

    Pier1 Well-Known Member

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    Ok I’ll bite, where is the “Tip” to work around this possibility?
     
  3. Archaon

    Archaon Well-Known Member

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    Multiple lenders to avoid "All-monies clause"
     
  4. datto

    datto Well-Known Member

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    If you got a huge savings acct, move it to another bank?
     
  5. Terry_w

    Terry_w Lawyer, Tax Adviser and Mortgage broker in Sydney Business Plus Member

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    There is none other than this one. As Archaon says it can only be avoided by using different lenders.

    But think of the chances of it happening, especially after the ME Bank incident this week.
     
  6. Pier1

    Pier1 Well-Known Member

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    Ah, but no longer off setting though ;)
     
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  7. datto

    datto Well-Known Member

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    Yeah True. But how valuable is an offset in these challenging times? OK you may save x amount of interest with an offset but could you earn more money putting the money somewhere else?

    How much more likely is tt that a bank will take a chomp out of your savings now than say 6 months ago?
     
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