Affordability assessment needs to consider the whanau as a whole   

In April 2021, Craig wanted to buy a car for his family costing $21,000. Initially Craig and his wife, Louise, made a joint loan application, but the lender said that Louise’s income as a fruit picker was too unstable, and assessed the loan affordability in Craig’s name alone.

The lender first looked at Craig’s income, made up of a JobSeeker benefit and a Working for Families benefit. Craig paid the family’s rent and power bill directly from his benefit. Craig also had 16 deductions from his Jobseeker benefit repaying benefit advances he had received. After all these deductions, Craig was left with about $60 of the $575 Jobseeker benefit.

When the lender assessed Craig’s loan affordability, they calculated Craig’s expenses as being $767.11 against income of $1,021.78, leaving a weekly surplus of $254.67 allowing him to make weekly loan repayments of $178 with a weekly surplus of $76.67.

Craig managed to make the loan repayments for about six months, and then started missing payments. Craig explained that both he and his wife were unwell and were struggling financially. Unfortunately, because Craig’s budget was in deficit, he did not meet the lender’s hardship criteria and the lender gave Craig two options:

  • surrender the car to be sold at auction to reduce the debt
  • bring the loan up to date by paying the arrears of $2,400 and continue to repay the loan.

Craig began to think that the only option was to surrender the car, but when he approached a financial mentor for help, she identified concerns about the original loan affordability and helped Craig complain to FSCL.


Craig’s financial mentor said it appeared the lender had relied on Louise’s income when calculating affordability. However, Louise was working as a casual fruit-picker and when the weather was bad, Louise was unable to work and could not contribute to the family’s expenses.

The lender disagreed saying they had not included Louise’s income in their affordability assessment. They said that the loan was affordable.


Under the Credit Contracts and Consumer Finance Act 2003 the lender is obliged to satisfy themselves that Craig could afford to repay the loan without suffering substantial hardship. When assessing loan affordability, the lender attributed half of the family’s expenses to Craig and half the family’s expenses to Louise. The problem with this approach was that the lender was assuming that Louise could afford to pay half the family’s expenses.

Louise had given the lender a copy of her employment contract, showing that she was employed as a seasonal, casual worker with no job security. Louise had also given the lender five pay slips showing that she earned on average $300 a week. If Louise paid half of the family’s rent commitment, being $200 a week, she would be left with $100 to contribute towards her half of the rest of the family’s living expenses.

Given that the lender had calculated Craig’s half of the family’s living expenses as $365, Louise could not have paid a half share and it was inevitable that Craig’s income would be needed to cover more than half of the family’s living costs.

Looking at the family’s budget, including Louise’s income and expenses, there was a weekly surplus of $178, exactly the same amount as the loan repayments. This left no money available as an emergency buffer. It was our view that if the loan had been properly assessed the lender would have concluded that the loan was unaffordable and declined to lend.

We were satisfied that the lender had not met their responsible lending obligations and had breached section 9C(3)(c) of the CCCFA. The remedy for a breach of section 9C of the CCCFA is set out in section 89(1)(aaa) in the CCCFA; the lender is obliged to refund all the interest and fees they have charged and cannot charge any interest and fees in the future.

We calculated the lender was obliged to reduce the debt by about $7,000, reducing the debt from $21,000 to $14,000.


The lender and Craig accepted our view. With the financial mentor’s help Craig was able to demonstrate that he could afford to repay the loan at $100 a week, allowing Craig to keep the car. We considered this to be a reasonable repayment amount and the complaint was resolved on this basis.

Insights for participants

Although the lender initially thought the lending met their lending criteria, we were pleased to see that they accepted they had got the affordability assessment wrong and were prepared to resolve the complaint on terms that would work for Craig.