The debt
Judith purchased a vehicle a number of years ago, financed by a loan to Car Loan Company. Judith’s debt to Car Loan Company was refinanced several times. The last loan contract was dated 18 March 2006 for $16,300. With fees and interest, the total amount to be paid under the loan was around $30,000.
Another finance company, Loan Finance Limited, purchased Judith’s debt from Car Loan Company, and took over management of her debt. In February 2009, Loan Finance obtained a court judgment saying that Judith had to pay it $10,900. In January 2010 Loan Finance obtained an attachment order from the court for the amount of $10,950. Judith was ordered to pay $15 per week towards the Loan Finance debt.
In February 2010 Loan Finance obtained a charging order over a property owned by Judith in Auckland, for the amount of $11,000. In January 2011 Loan Finance obtained a second attachment order against Judith, the debt by then sitting at $10,800, to pay at $50 a fortnight.
In October 2013 Judith contacted FSCL. She said she was afraid of Loan Finance, and unable to pay $25 every week towards the debt. Judith had very poor health and sometimes could not afford the $25 payment because she had to pay for medications. Judith was concerned that Loan Finance would repossess her current vehicle and goods she now owned. She also thought the balance of her debt was too high.
History of the debt
The contract Judith signed in 2006 listed a Nissan vehicle as security. Judith understood that this vehicle was in an accident, written off and was uninsured. After this, Judith had various other vehicles in her possession, and Loan Finance Limited issued her with several pre-possession notices.
There had also been interest accruing on the balance of the debt while Judith was making sporadic payments under the attachment order. Loan Finance charged Judith interest at the court rate of 8.4% per week, and was continuing to charge this. Loan Finance said that as at 1 November 2013, the balance of the debt sat at around $23,500. Loan Finance wanted to enforce the charging order and sell Judith’s home.
FSCL’s review
To review what the balance of the debt should be we first looked at the latest court order in time, being the second attachment order which was for the amount of $10,800. We noted that section 65A of the District Courts Act 1947 said that court interest should accrue monthly, not weekly. We asked Loan Finance to recalculate the balance of the debt and provide an updated statement of account.
Appropriation
We also thought that Loan Finance had no right to repossess goods Judith currently owned. Under section 44 of the Personal Property Securities Act 1999 (“the PPSR”) (as it was at the time), a debtor needs to appropriate, that is, turn their mind to including consumer goods they currently own, as security for a debt. This is unless the goods are an accession (say, an addition to a vehicle like a spoiler), or are a replacement for the original security item under the loan, which automatically become security for a debt.
In our view, the further vehicles Judith had owned over the years could not be viewed as replacements for the original Nissan vehicle, because information on the file showed that the Nissan vehicle had been disposed of. We considered a replacement vehicle to be one purchased with the proceeds of sale of an original security item.
Looking at section 44 of the PPSR we noted that only a debtor could appropriate after acquired property. What Loan Finance had done, and what it was looking to do in the future, was appropriate Judith’s vehicle and goods she owned now to the loan, acting as her attorney under a power of attorney clause in the original March 2006 loan contract.
However, we were of the view that the power of attorney clause was not wide enough to give Loan Finance Limited the power to unilaterally appropriate Judith’s goods to the debt. As a result we suggested that Loan Finance remove PPSR listings it had placed over Judith’s vehicle and goods, and said it had no right to repossess goods/vehicles she currently owned.
The charging order
In relation to the charging order over Judith’s home, we looked at the District Court Rules 2009, and it appeared that under section 96A of the rules, the charging order Loan Finance Limited had over Judith’s home had expired. We also noted that Loan Finance Limited had been the fifth listed secured party on the title, and forcing a sale would have resulted in Loan Finance receiving little to any of the proceeds. Therefore, we saw little value in Loan Finance applying for a new charging order.
Repayment arrangement
We suggested that Loan Finance enter into a suitable repayment arrangement with Judith which would result in the balance of Judith’s debt reducing over time.
Loan Finance provided an updated statement of account showing that the balance of the debt sat at $10,500 as at 2 April 2014. Loan Finance said it was prepared to enter into a repayment arrangement with Judith, if she could provide a statement of her financial position and an address for service.
Judith said she could probably now keep up the $25 per week payments, but was reluctant to provide her home address as she was afraid that Loan Finance would repossess her goods. Judith said she would look at providing her daughter’s address as an address for service.
Unfortunately Judith was not prepared to provide evidence to support her budgeter’s statement of financial position and disengaged with our investigation process. We closed our investigation.
