Charlotte complained to her lender about how they had applied a lump-sum repayment to her business loan account. To resolve her complaint, the lender agreed to discount her loan balance by $2,000 at the end of the loan term or when the loan was repaid in full.
Charlotte’s business subsequently topped up their loan and the existing loan agreement was replaced with a new agreement. The new loan was for $147,000, being the balance of the original loan, $47,000, and the additional $100,000 the business borrowed.
After the new loan agreement was signed, Charlotte complained that the lender had not discounted the $2,000.
The lender agreed to discount $2,000 from the new loan. However, Charlotte was not satisfied with this and complained to FSCL.
Dispute
Charlotte believed the lender should also have discounted the interest costs to reflect that the new loan agreement should have been for $145,000 (not $147,000).
The lender believed interest charges should not be discounted. They should reflect the loan agreement Charlotte signed.
Review
The agreement from the earlier complaint did not say when the $2,000 would be discounted if Charlotte’s business topped up their loan. However, it appeared to us that the $2,000 should have been applied when the loan was redocumented.
We concluded that Charlotte’s business had been disadvantaged because they were paying interest on a $147,000 loan, when they should have been paying interest on a $145,000 loan. The difference in interest was around $440 over the term of the loan.
While Charlotte had signed the new loan agreement agreeing to the interest charges, she did not understand that the $2,000 discount had not been applied.
Resolution
We suggested to the lender that they should offer compensation to recognise that Charlotte’s business had been disadvantaged. The lender made a goodwill offer of $2,000, on the condition that it was applied towards the loan.
Charlotte was initially reluctant to accept the offer. She wanted more compensation and for it to be paid in cash (not applied towards the loan).
Charlotte accepted the offer after we explained that $2,000 seemed a reasonable amount of compensation. It was more than the interest in question (which was around $440) and her case would not warrant a significant award of compensation for inconvenience. We also explained that it was not necessarily unfair for compensation to be applied to the loan.
Insights for participants
This is an example of a complaint which may not have arisen if the scheme member had kept better written records. If the staff member who had arranged the new loan agreement had a better understanding of the agreement reached about the earlier complaint, they probably would have documented the loan differently and the complaint would not have arisen.
