Bendigo and Adelaide Bank will have to reduce the balance owing on a A$1.2 million loan to an elderly migrant couple in Sydney by around $250,000 after a judge ruled the bank should never have extended credit in the first place.Steve Karamihos and Aristea Karamihos borrowed the funds in 2007 to refinance a loan of $966,000 from Bank of Queensland taken out only one year earlier.The Karamihos used a broker, South Western Financial Services, affiliated to Mortgageport, to source the loan.Justice Michael Pembroke of the Supreme Court New South Wales ruled that the loan from Bendigo was "was unjust for the purpose of section 76(1) of the National Credit Code. ""I have reached that conclusion having regard to the consequence of non compliance by Mr and Mrs Karamihos, namely the loss of their sole residence; the relative bargaining power of the parties; the absence of any negotiation at the time the transaction was entered into, and absence of any practical opportunity for there to be any negotiation. "I have also had regard to the fact that Mr and Mrs Karamihos were not reasonably able to protect their interests. "They were too elderly and too foolish to know what was in their best interests. And they had no independent legal or financial advice. "Their daughter apparently stood to receive $100,000 from the loan proceeds but she was, in any event, in no position to dissuade her father."The judge wrote that the finance broker, George Koovousis, "had no commercial incentive to advise Mr and Mrs Karamihos that the loan was unsuitable for them. His financial incentive was entirely the opposite."He ruled that Bendigo "did not make reasonable enquiry as to whether Mr and Mrs Karamihos could meet their obligations under the loan", while the borrowers - who had little effective literacy in English - "did not have independent legal and financial advice and that [the bank] did not take any active steps to ensure that they understood the nature and implications of the transaction."The judge said that if Benidgo's credit officer "had made reasonable enquiries of the value of the Marrickville property, there would have been no loan approval and no loan."The transaction should therefore be re-opened. Mr and Mrs Karamihos  should be put in the same position that they would have been in if they had not taken on increased borrowings on different terms. The BOQ loan should be treated notionally as if it had continued and there had been no refinancing with Bendigo Bank."