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Alleged irresponsible lending with no evidence of harm

In July 2020, Dean applied for a loan to buy a car. The lender gathered information about his finances, including bank statements from past three months. The lender then completed an affordability assessment that showed Dean’s weekly income exceeded his expenses by $371. Based on this, the lender said Dean could borrow $21,000, with weekly repayments of $158. According to the lender’s figures, this meant Dean would have a weekly surplus of $213 once the repayments for the new loan were included.

In May 2022, a financial mentor started assisting Dean with his finances. After looking at the details of the car loan, the financial mentor complained to the lender. He said a proper affordability assessment would have shown Dean was unable to afford the repayments for the car loan. The lender disagreed, saying they were confident they had carried out a proper affordability assessment. As the complaint was not resolved, the financial mentor asked FSCL to investigate.


The key dispute in this case was about the appropriateness of the lender’s affordability assessment. The financial mentor provided us with an alternative affordability assessment, setting out the figures he thought the lender should have used when assessing Dean’s application.

The biggest difference between the competing affordability assessments was rent. The lender only included half the amount listed on Dean’s tenancy agreement in their affordability assessment. They did this because they assumed Dean’s wife would pay the other half. The financial mentor said there was no evidence to support this assumption.

The financial mentor also raised other concerns about the lender’s affordability assessment. He noted they failed to include repayments for another loan Dean had taken out, and said they had underestimated expenses like food and petrol. According to the financial mentor’s figures, Dean would have had a weekly deficit of $104 after taking out the loan.


Under the Credit Contracts and Consumer Finance Act 2003, the lender had a duty to make reasonable inquiries so as to be satisfied it was likely Dean would be able to make the payments for the loan without suffering substantial hardship. The purpose of this duty is to protect borrowers from hardship.

In terms of rent, the lender said they had only attributed half the cost to Dean because his tenancy agreement listed both him and his wife as tenants. We noted this did not necessarily mean they shared rent costs equally. We also noted Dean’s bank statements showed the full amount of rent coming out of his account, with no evidence his wife was paying half the cost. Based on these factors, we said the lender should have made further inquiries about how much rent Dean was paying.

We found the lender had also failed to include other expenses in their affordability assessment. A key example was repayments for a different loan that had increased shortly before the lender was assessing Dean’s application. As with the rent payments, this information was set out on the bank statements the lender obtained. We also decided it was unreasonable for the lender to assess affordability based on petrol costs that were lower than Dean’s actual expenditure on his bank statements.

These shortcomings in the lender’s affordability assessment left them at risk of Dean’s complaint being upheld. Where an irresponsible lending complaint is upheld, the usual remedy is for the lender to refund all interest and fees. But FSCL is also required to do what is fair in all the circumstances.

We noted there was no evidence Dean had been unable to make his loan repayments, or that he had suffered substantial in doing so. This meant there was no evidence of the type of harm the responsible lending duties are intended to address. By the time the complaint was referred to FSCL it was more than two years since Dean had taken out the loan. During this time, the loan had never been in arrears and no late payment fees had been charged. Given there was no evidence of actual financial difficulties, we decided it would not be fair to uphold Dean’s complaint.


The financial mentor said he thought Dean might want to provide further information that could change our view. But in the end Dean chose not to respond to our preliminary decision, and we closed our file.

Insights for consumers

Lenders have important duties aimed at ensuring they don’t lend irresponsibly. The purpose of these duties is to protect consumers, and to prevent them from facing substantial hardship repaying loans. We take complaints about breaches of these duties seriously, but also have to do what is fair. This means that where there is no evidence to show a borrower faced any difficulty in repaying a loan, we are unlikely to uphold the complaint.