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A guesstimate is not good enough

Jake wanted to buy a car in May 2021 for $13,000 and the car dealer helped him apply for a loan to pay for it.  Jake’s loan was approved, and he bought the car.

Jake missed the first loan payment and continued to struggle to make the payments over the following weeks. About a month after buying the car, Jake contacted the lender saying the payments were unaffordable and asking if he could return the car and cancel the loan agreement. The lender said that Jake was outside the seven working day cancellation period, so this was not an option.

Over the following 18 months Jake struggled to repay the loan and was in frequent contact with the lender, asking for hardship relief, particularly after he hurt his back and could not work. As Jake had purchased a health waiver, a product similar to health insurance, the lender contributed to Jake’s payments for three months, but this was not enough to really make a difference.

In July 2023 Jake went to a financial mentor who realised the loan was unaffordable and suggested Jake surrender the car. The car was surrendered, and sold, leaving Jake with a $16,000 debt. The financial mentor then asked the lender why they had loaned to Jake in the first place.

The lender was confident that their loan application process showed that the loan was affordable. The financial mentor did not agree, so she complained to FSCL on Jake’s behalf.


The financial mentor calculated, on the May 2021 information, that Jake had a $170 weekly budget shortfall. The financial mentor said that the loan was unaffordable and should never have been approved.

The lender continued to maintain that the loan was affordable saying that Jake had a $264.97 weekly surplus and could easily afford the $146 weekly loan repayments.


When we looked at the lender’s loan assessment, we noticed the lender had allowed $100 for rent, but the financial mentor had allowed $210. We asked the lender about this discrepancy, and the lender said the car dealer had not recorded the amount of rent Jake was paying on the loan application, so they included $100 as a nominal amount of rent, without checking with Jake.

We suggested to the lender that, by failing to include the correct information in their affordability calculation, they had not satisfied themselves that Jake could afford to repay the loan without suffering substantial financial hardship. It was our view that the lender had breached their Credit Contracts and Consumer Finance Act 2003 lending obligations which requires the lender to satisfy themselves that a borrower can afford to repay the loan without suffering substantial financial hardship.

If the correct amount of rent was included in the lender’s application, Jake would have had only a $9 weekly surplus. We had concerns about some of the other amounts in the lender’s affordability assessment, and suggested the lender might like to reconsider their approach to this complaint.


The lender agreed to refund the interest and fees charged on Jake’s loan, reducing his debt from $16,000 to $2,500, not charge any future interest and fees, and allow him to repay the debt at $50 a fortnight. The lender’s offer was in line with the remedy for a breach of the Credit Contracts and Consumer Finance Act 2003. Jake accepted the lender’s offer, and the complaint was resolved.

Insights for participants

If information is missing from a loan application, a lender should check with the person applying for the loan what the correct amount is and never substitute their own nominal sum.