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Accumulated loan arrears

How a loan in default can mushroom 

In 2005 Kathleen borrowed $4400 from a finance company, All Rights Reserved (ARR), to buy a car.  The loan was to be repaid over three years at a total cost of $7096 and was secured by the car.  The loan contract also included an all present and after acquired personal property (PAAP) clause under the Personal Properties and Security Act 1999. 

 Kathleen made reasonably regular payments for a year and $1394 was repaid.  After that no further payments were made and ARR’s attempts to contact Kathleen were unsuccessful until 2012.  The car registration lapsed in 2010 and was removed from the financing statement.  In 2012 Kathleen said she was on a sickness benefit and in a difficult financial position but agreed to pay $30 a week towards the loan.  When no payments were received repossession agents removed personal property from Kathleen’s lodgings and then served her with a Notice of Claim for $66,335.35.  

The complaint 

Kathleen complained about the repossession of her items of personal property and questioned the amount of the debt claimed by ARR.  She believed her household goods had been repossessed unlawfully and wanted ARR to return her property, reduce the loan balance and accept payments of $2 per week. 

ARR’s position 

ARR had made extensive efforts to contact Kathleen without success. Once she had made an agreement to pay $30 a week but then made no payments, they felt that full repossession was necessary, given the time that had passed and the efforts already made.  The reason the loan balance was so high was the accrual of default interest and fees over seven years when no payments were made. 

FSCL’s view 

As court proceedings had already started and Kathleen acknowledged the original debt, we were limited on how much we could do.  The best solution seemed to be to negotiate a settlement and discussions were held, both with Kathleen and with ARR, to try to reach an agreement about reduction of the outstanding amount and the minimum payments acceptable.  In the end Kathleen would not agree to ARR’s minimum requirements and decided to go to court.  Therefore she withdrew her complaint.