In May 2022, Jasmine’s business borrowed $166,400 to buy a new car. After Jasmine missed the first two loan repayments, she contacted the dealership she bought the car from, asking to return the car. Jasmine explained that a new motorway had been built, so traffic was no longer passing through her town, and her business sales had dropped significantly, so she could no longer afford the car.
Jasmine then contacted the lender directly, to ask for six to nine months of hardship relief. However, the lender declined her request. The lender said they were unable to offer hardship relief because Jasmine had not made any payments towards the loan, and she had not explained how she intended to pay the loan after six to nine months. The lender said that Jasmine could either surrender the car and have the lender sell it through an auction, or she could sell the car privately herself.
Jasmine surrendered the car to the lender in August, and the lender contacted a dealership to value and sell the car. The dealership estimated the auction value of the car to be between $120,000 and $130,000, so they suggested setting a reserve price of $125,000. The lender sent a letter to Jasmine’s business address before the auction, notifying her of the auction time and reserve price.
The car was sold at auction for $125,200. Jasmine was left with a shortfall of $73,800 to pay, which was made up of the remaining loan balance, interest, and an early repayment fee.
Jasmine complained to FSCL, as she thought the shortfall was too high.
Dispute
Jasmine explained that she had not received the lender’s letter about the reserve price, as it had been sent to her old address.
Jasmine thought the lender had sold the car for too low a price. She said that if she had known what the lender was going to sell the car for, she would have sold it privately herself. Jasmine said she was expecting to pay a shortfall of around $10,000 to $15,000, not $73,800.
The lender told Jasmine that they sent the auction letter to her business address. They explained that it was Jasmine’s responsibility to update her contact information if it was no longer correct.
The lender explained that the value of the vehicle had decreased, and it could not be sold for the same amount Jasmine had bought it for. The lender explained that the reserve price was set in accordance with the valuations they obtained, and the car sold for slightly more than the reserve price.
The lender tried to negotiate the shortfall balance with Jasmine, but Jasmine said she was only able to pay $10,000 towards the shortfall. The lender declined Jasmine’s offer. Instead, they offered to reduce the balance owing by 30%, to $51,660. Jasmine declined the lenders offer.
Review
Under the Personal Property Securities Act 1999, when selling repossessed goods, a lender has a duty to obtain the best price reasonably obtainable as at the time of sale. Our role was to determine whether the lender did this.
First, we looked at the valuation the lender obtained. The lender engaged a well-known dealership to value and sell the vehicle. The dealership was qualified and experienced in car sales and auctions. We found that it was reasonable for the lender to rely on their valuation and set the reserve price based on their valuation.
We found that selling the vehicle by auction was an appropriate, and common, method of sale. The vehicle sold for slightly more than the reserve price, which supported a finding that the lender got the best price reasonably obtainable.
We looked at Jasmine’s complaint that she had not received the auction letter. However, the lender sent the letter to the address listed in the credit agreement, which was also Jasmine’s address on the companies register. We agreed with the lender that it was Jasmine’s responsibility to update her address. It was unfortunate that Jasmine had not received the letter, but we could not find that the lender was at fault.
Resolution
We found that the lender had met their duty to get the best price reasonably obtainable for the car and suggested that Jasmine discontinue her complaint.
Jasmine did not respond to our preliminary decision, and we closed our file.
Insights for consumers
When selling repossessed goods, a lender does not have to wait for the best time to sell the goods, and they are not required to sell them for their market value. Instead, lenders must show that they got the best price reasonable obtainable at the time of sale.
