It is 2003 and Jill decides to take out a loan
In May 2003 Jill entered into a credit contract with Citywide Finance (“Citywide”) to borrow $3,995. The total amount for Jill to repay including interest and fees was $6,630.61. Jill fell behind with her payments and there were long periods of non-payments.
In 2006 Hawk Finance (“Hawk”) purchased Jill’s debt from Citywide and took over management of the debt.
In April 2009 Hawk obtained an attachment order against Jill for $4,913.35 (“the attachment order amount”). Jill was ordered to pay 245 weekly payments of $20 and a final payment of $13.35.
Jill contacted Hawk in May 2014 because she expected that her payments towards the attachment order amount would soon finish. However, Hawk told Jill that she still had $4,000 to pay on her debt. Hawk then filed with the District Court for a total amount of $2,998.59. This amount included court interest, penalty interest and enforcement costs totalling $2,698.59 and $300 in court fees.
In October 2014 Jill contacted FSCL. Jill complained that Hawk never told her that there was interest accruing on the debt balance while she was making payments towards the attachment order amount. Jill believed that she had paid off her debt in full to Hawk.
Was Hawk entitled to charge interest on the attachment order amount?
Under the District Courts Act, creditors can seek court interest on a judgment debt which remains unpaid. This meant that Hawk did have the right to charge Jill court interest while she was paying the attachment order amount.
The court interest rate has changed over time. Hawk applied an interest rate of 7.5% which was the court interest rate at the time the attachment order was issued against Jill. In July 2011 the court interest rate was reduced to 5%. However, Hawk believed that the interest rate applied should be 7.5% from the time the attachment order was issued against Jill and continue until Jill repaid the debt in full.
In our view, the correct way to calculate the balance of Jill’s debt was for the interest rate to reduce to 5% from 1 July 2011. This made the balance of the debt $1,000.52 as at 31 October 2014.
Should Hawk have told Jill that interest was accruing on the attachment order amount?
In our view, Hawk should have informed Jill prior to May 2014 that interest was accruing on the balance of Jill’s debt while she was paying the attachment order amount. We considered it appropriate for Hawk to compensate Jill for the inconvenience she suffered when she discovered the debt had not reduced as she thought.
We found that Hawk was entitled to charge Jill court costs of $300. However, to compensate Jill for Hawk’s lack of contact about the interest accruing, we awarded Jill $300 as inconvenience compensation. Effectively Hawk wrote off the requirement that Jill pay the $300 court costs.
Jill agreed to pay the outstanding balance of $1,000.52 and entered into a repayment agreement to pay $80 per month.