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Dealer does not satisfy the lender’s responsible lending obligations

Laveni saw a car advertised for sale on Facebook and contacted the car dealer. The car dealer said they could help Laveni arrange finance to pay for the car.

The car dealer gathered information about Laveni’s income and expenses. The lender assessed Laveni’s application and were satisfied that she had a budget surplus of $385.63 a week. The car dealer offered Laveni a car costing $12,000 with weekly payments of $111. The dealer offered to drive the car to Laveni’s home, in a remote part of New Zealand.

The car dealer arrived at Laveni’s home at 5am and asked Laveni to drive him back to the nearest airport, four hours drive away. Laveni agreed and while they were in the airport carpark the car dealer asked Laveni to sign the loan agreement. Laveni had left her glasses at home and could not read the fine print but felt she had no option but to sign the agreement.

The following day Laveni took a closer look at the car and was not satisfied that it was in good condition. A week or so later Laveni went into the Citizen’s Advice Bureau (CAB) when she was in town. She asked the CAB worker to read the loan agreement and discovered the lender had charged her for the installation of an immobiliser device. An immobiliser device allows the lender to prevent the borrower from driving the car if the loan is in default. When the CAB worker explained what the immobiliser was, Laveni said that she did not agree to the installation of the immobiliser.


Laveni complained to the lender that the car was not in good condition and that she did not agree to the immobiliser being installed. Laveni said she felt pressured into signing the loan agreement because she was at the airport with no way to get back home. Although Laveni agreed that she wanted to buy the car, she said she did not agree to pay for the immobiliser.

The lender said that the condition of the car was not their problem, and Laveni should complain to the car dealer. The lender also said Laveni agreed to have an immobiliser in the car when she signed the loan agreement.

Laveni did not accept the lender’s response and complained to FSCL.


We agreed that Laveni’s concerns about the quality of the car were not the lender’s responsibility. We suggested Laveni contact the Motor Vehicle Disputes Tribunal about this part of her complaint.

However, we were concerned about Laveni signing the loan agreement in the airport carpark. Under the Credit Contracts and Consumer Finance Act 2003 the lender is obliged to assist Laveni to make an informed decision about whether or not to enter into the agreement and be reasonably aware of the full implications of entering into the agreement.

We were concerned the car dealer:

  • sold Laveni the car without giving her the opportunity to inspect it
  • arrived at Laveni’s home at 5am
  • immediately asked Laveni to drive him the four hours to the nearest airport
  • asked Laveni to sign the loan agreement in the car at the airport.

It was our view that, when the lender learned of these circumstances, they should have been concerned that the car dealer, their agent, might not have met their obligations to make sure Laveni was making an informed decision and understood the implications of signing the loan agreement.


We suggested, and Laveni and the lender agreed, that the lender should refund the dealer’s fee and the cost of installing and monitoring the immobiliser device, amounting to a refund of $850. The complaint was settled,

Insights for participants

Car dealers sometimes act as the lender’s agent when assisting the borrower to apply for a loan to buy a car, and the lender is responsible if the car dealer does not meet the responsible lending obligations in the Credit Contracts and Consumer Finance Act 2003.