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Frustrating finances

Tui’s borrowing

Tui had been a frequent borrower from a short-term lender and had always repaid the loans without incident. In September 2015 Tui borrowed $600, due to be repaid the following month.

Tui defaults, but undertakes to pay

Tui defaulted on the loan, and when the lender contacted Tui, she explained she had been on leave from her job and already used her leave entitlements. Tui was working again and was confident she could fully repay the loan in two instalments, one due in December and one in January. The lender froze the interest and fees on the account as at October 2015.

Attempts to enter repayment agreement

Just before the December payment was due to be debited Tui contacted the lender, and said she was unable to make the December payment, but would repay the loan in full in January.

When Tui missed the January payment, the lender tried to contact Tui. The lender rang Tui at work, but was told she no longer worked there. In March the lender was able to trace Tui and spoke to her saying it wanted to enter into a repayment arrangement, and would accept smaller, regular repayments. For most of 2016 the lender tried to work with Tui, and later her budget adviser, with no success.

Payments start, then stop

Finally, in December 2016 Tui was in regular work again and agreed to pay $10 a week. Tui made the payments until April 2017, when the payments stopped. The lender continued to talk to Tui about repaying the loan. Tui gave frequent undertakings to start payments again, but when these promises were broken the lender became increasingly frustrated.

Automatic payment form submitted

In August 2017, without Tui’s permission, the lender completed an automatic payment form Tui had signed when the loan was arranged back in 2015 and sent it to Tui’s bank, starting the payments again. The payment was dishonoured by Tui’s bank, incurring dishonour fees.

Tui complained to the lender. The lender agreed it should not have submitted the automatic payment form, and offered to compensate Tui for any dishonour fees, provided Tui gave her bank statements showing the amount of the dishonour fee.

Tui’s view

Tui complained that the lender had sent a pre-signed automatic payment form to her bank without her permission. She did not agree to provide her bank statements, and referred her complaint to FSCL. Tui said her bank had charged her $17.50 as a result of the dishonoured payment.


We agreed the lender should not have submitted the pre-signed automatic payment form when it knew Tui did not agree to restart payments. Although we agreed the request for bank statements confirming the amount charged by Tui’s bank was not unreasonable, we

asked the lender whether it would forgo the need for the statements and offer to reduce Tui’s debt by $17.50 in full and final resolution of her complaint.

The lender agreed to our request, and we contacted Tui to see whether she would accept a debt reduction of $17.50 in full and final resolution of her complaint. We explained to Tui that we cannot punish the lender for its mistake, and that our focus is on putting things right for her. As the direct loss caused by the lender’s actions was $17.50 we said that the offer was reasonable.

Tui declined the offer saying she would prefer to pursue her complaint, that the bank should not have accepted the automatic payment form, through the Banking Ombudsman scheme. Tui did not give any more information about the consequences the dishonour of the automatic payment had for her.


We explained to Tui that while the Banking Ombudsman could consider a complaint about the bank, it would not be able to help with her complaint about the lender. When Tui continued to decline the offer, we formally declined to investigate Tui’s complaint on the grounds that the lender’s settlement offer was reasonable.

Our insight

While defaulting borrowers can be frustrating for lenders, it is very important that the lender follows due and proper process.