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Are entertainment expenses relevant?  

Drew borrowed approximately $2,500 in August 2022 to buy a phone. He was receiving income from Work and Income New Zealand (WINZ) at the time. Drew immediately defaulted on his weekly loan repayments of $37. Drew’s debt then increased to $2,707 due to added fees and interest.

With the assistance of a financial mentor, Drew complained to FSCL that his loan was unaffordable.


Drew said that the lender’s assessment of his expenses did not match his bank statements. He said the lender did not include entertainment costs, clothing, or medical expenses.

The lender said that their assessment of Drew’s bank statements showed that he had a reasonable surplus after meeting his weekly expenses. The lender thought Drew could afford necessities while repaying his loan.


We found that the lender had met their lender responsibility under section 9C(3)(a) of the Credit Contracts and Consumer Finance Act 2003 (the Act), to be reasonably satisfied that Drew could make loan repayments without facing substantial hardship.

The lender estimated Drew’s weekly surplus as $180.75 after applying a $40 buffer. Drew told the lender he could make repayments of up to $100 per week.

Drew’s bank statements showed that he was receiving a $412 WINZ benefit when he applied for the loan. His benefit had previously been much higher. The lender appropriately selected the lower current benefit amount as Drew’s income.

Drew was already repaying two other loans when he applied for the loan. Drew paid different amounts towards these debts each week. We found that the lender should have selected the highest recurring payment amount to include in their assessment.

Drew underestimated his weekly expenditure on food and his phone. The lender should have used the higher values included in Drew’s bank statements.

Drew spent significant funds on entertainment, like subscription services and dining out but the lender correctly excluded these costs from their assessment.

The lender should have considered but did not consider medical costs and clothing. These costs did not appear in Drew’s bank statements, so the lender should have used a benchmark to assess a reasonable amount.

The lender’s assessment of Drew’s expenses could have been better. However, when we factored in increased amounts for expenses that the lender may have underestimated, Drew’s loan repayments were still affordable. Further, Drew had a surplus of over $50 per week after his repayments and expenses.


Despite lending responsibly to Drew, the lender gave him two options to resolve his complaint. Either Drew could pay his frozen debt ($2,707) at $15 per week or make a one-off payment of $2,150 as a final settlement.

Drew did not respond to the lender’s offer and so we closed our investigation.

Insights for participants

When lenders see expenses change in a borrower’s bank statement, they should use higher estimates in their affordability assessment.

Lenders do not have to take entertainment costs into account when determining whether loan repayments will be affordable. Lenders can use benchmarks to estimate weekly expenses when a borrower’s information is insufficient.