Sam and his partner Tom took out a loan as co-borrowers with a finance company. Tragically, Tom took his own life. Tom’s vehicle, which was security for the loan, was sitting at the property where Tom died. The vehicle was picked up by the New Zealand Police and was then handed over to Tom’s family.
Sam told the finance company about what had happened to Tom in May 2013 and said he did not want to continue paying the loan. Nevertheless, Sam continued making payments through until August 2013.
Sam said the finance company should have entered into a repayment arrangement with him. Sam also said that the finance company had not done enough to locate Tom’s vehicle, repossess and sell it, and apply the sale proceeds to reduce the balance of the loan. Sam did not think he was liable to pay the balance of the loan.
Tracing the vehicle
The finance company tried to find the vehicle and contacted the Police, the lawyers acting for Tom’s estate, and the New Zealand Transport Agency, to try and locate the vehicle. Sam thought the finance company could have traced the vehicle by looking at the electoral roll for Tom’s family members. Sam looked at the electoral roll and found an address for Tom’s family. Around the same time, the finance company received information from the estate’s lawyers about the location of the vehicle.
The finance company repossessed the vehicle. An auctioneer estimated the vehicle would fetch $2,000 at auction.
Sam sought his own valuation from an auctioneer who quoted a sale price of around $4,000. Sam’s auctioneer did not physically view the vehicle.
The finance company thought the vehicle might fetch a better price if it was sold in Auckland. The vehicle sold for $2,500.
In our view, the finance company had done everything it could to locate the vehicle after Tom’s death. From May to August, Sam was still paying the loan, and the finance company had made the decision not to repossess the vehicle, but continue to accept Sam’s payments. We could not interfere with the finance company’s commercial judgment decision to do this.
In addition, Sam stopped paying the loan in August and the finance company was able to locate the vehicle by October. In FSCL’s view, this was reasonable.
We told Sam that it was the finance company’s commercial judgment decision as to whether it entered into a repayment arrangement with Sam.
Sam was liable to pay the loan upon Tom’s death, as the loan contract confirmed the co-borrowers were ‘jointly and severally liable’ to pay the loan. This means that if either co-borrower under a loan cannot pay, the other co-borrower has to assume sole responsibility for paying the loan.
We concluded that the finance company had sought the best sale price. The best sale price needs to be determined against the value of the vehicle and market conditions. For instance, it would be remiss of a finance company to let a vehicle sit un-sold until it fetched a certain sale price. If nobody is buying the vehicle, this indicates that the sale price is too high, and does not match market conditions. In this case, the fact that the finance company secured a higher sale price than the auctioneer’s estimate indicated it had obtained the best sale price it could in the circumstances.
We suggested that Sam confirm how much he could pay towards the balance of the debt and then look at entering a repayment arrangement with the finance company, with our assistance.
Unfortunately, Sam did not contact us again, and we closed our investigation.