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A balanced approach leads to resolution

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With a little give and take the parties to this complaint were able to find a resolution that worked for them without needing a formal decision from FSCL.

What happened?

Andrew and his wife, Carmelita, borrowed money to buy a car. Andrew made the loan repayments without any problems until he lost his job about 18 months later.

Andrew contacted the lender and explained he could no longer afford the loan repayments. The lender deferred the payments for two months while Andrew looked for another job. After the two months had passed, Andrew decided he could not afford to repay the loan and wanted to sell the car to reduce his debt. Andrew went to a reputable dealer who agreed to pay $30,000 for the car.

Andrew’s debt at this time was $43,000 and the lender said the $30,000 offered by the dealer was not enough and they did not agree to the sale. Andrew voluntarily surrendered the car for the lender to sell. The car sold for $26,000, leaving Andrew owing about $17,000.

Andrew was struggling financially and, although he fully accepted responsibility for repaying the debt, had stopped repaying the loan. As a result, the lender recorded the debt as in default with a credit reference agency. Andrew then complained to FSCL.

What were the parties’ views?

Andrew said it was not fair that he still owed $17,000. If the lender had accepted the dealer’s offer, rather than going to auction, he would have been left owing about $13,000.

Andrew also wanted the lender to remove Carmelita as a co-borrower. Andrew said Carmelita has limited English language and did not understand that she was a co-borrower. Instead, Carmelita believed the documents she had signed related to the insurance only.

The lender agreed they should have explored the $30,000 offer more thoroughly and agreed to reduce the debt to $13,000. However, the lender did not agree to release Carmelita as a co-borrower. The loan application showed that she had lived in New Zealand for 20 years and was working in a customer service role that would have required a reasonable level of English comprehension. The lender was not convinced that Carmelita did not understand the documents she had signed.

What did FSCL do?

Andrew explained to us that, after he lost his job, Carmelita left him because he could not provide for his family. Andrew went on to say that Carmelita was trying to refinance her home loan but, with the credit reference agency’s default listing against her name, the bank declined her refinancing application. Andrew said that if the lender would remove the default against Carmelita’s name, he would accept the lender’s offer to reduce his debt to $13,000 and start repaying the debt at $100 a week.

We put Andrew’s proposal to the lender and, in the interests of resolving the complaint, the lender agreed to remove the default listing against Carmelita’s name. The lender went on to explain that they still considered Carmelita liable for the debt and if Andrew did not repay the loan as agreed, the default listing would return.

How was the complaint resolved?

With a little help from FSCL, the parties found a resolution that was fair for both of them. The lender took responsibility for the lower sale price of the car and reduced the debt. The lender was also prepared to be flexible and remove the default listing against Carmelita’s name provided Andrew repaid the debt.