Debt cycle

In 2016 Jimmy bought, and received, a tablet from a mobile trader. Jimmy’s weekly payments were an affordable $25 a week. Occasionally, over the years, the mobile trader contacted Jimmy, asking if he wanted to buy something else. Jimmy often said yes, increasing his payments to around $50 a week. These payments would almost always immediately be dishonoured, incurring default fees. No other items were delivered to Jimmy.

When Jimmy came to FSCL, he said he had bought and paid for a stereo from a mobile trader, but the stereo was never delivered. Jimmy wanted his money back. When the mobile trader said that he still owed money for a tablet he had bought three years earlier, Jimmy did not believe the mobile trader and asked FSCL to take investigate.



Jimmy could not understand how he still owed money for the tablet he barely remembered buying. Jimmy was adamant that he had made the ten $50 weekly payments and the mobile trader said it would deliver the stereo. When the stereo was not delivered, Jimmy cancelled the payments and asked for his money back.

The mobile trader said it did not deliver the stereo because Jimmy had only made eight payments. The mobile trader said Jimmy still owed it money for the tablet he had bought but not paid for. However, when reviewing Jimmy’s complaint, the mobile trader realised it had made a mistake when charging regular administration fees. The mobile trader recalculated Jimmy’s debt and said that he in fact only owed $20 and offered to write this debt off to resolve the complaint.

Jimmy did not accept the offer, saying the mobile trader owed him money for the stereo it had not delivered.



When we reviewed Jimmy’s history with the mobile trader, we saw that Jimmy had only made eight payments towards the stereo purchase. We told Jimmy the mobile trader was entitled to cancel this transaction.

However, there was no evidence that the mobile trader had made any enquiries into whether Jimmy could afford the purchases it had financed over the years. In addition, Jimmy’s history with the mobile trader showed that while he could afford $25 a week, every time the payments got up to $50 a week they would be dishonoured.

In our view, the mobile trader had failed to comply with its responsible lending obligations and was not entitled to any interest or fees associated with the lending.



As Jimmy had received the tablet, it was our view he was obliged to pay the $1,500 he had originally agreed to. In fact, Jimmy had paid the mobile trader $2,117.50 over the years. We proposed to recommend that the mobile trader refund the difference between the amount he had paid the mobile trader and the cost of the tablet, a sum of $617.50.

Both Jimmy and the mobile trader accepted our proposal and the complaint was resolved on this basis.


Insights for participants

Mobile traders must follow the responsible lending code. If we cannot see evidence of a robust loan assessment process, we will recommend that the mobile trader refund all interest and fees associated with the purchase.