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Hardship applications: repayments cannot be put on hold indefinitely

Holly’s financial situation changes

On 27 February 2014, Holly entered into a credit contract with Eastwest Loans (“Eastwest”). The loan was for $22,000. Holly was to make payments of $180 per week for 38 months. A Mazda vehicle was security for the loan. At the time, Holly was also an Eastwest employee.

In December 2014, Holly was made redundant. Her last day of work was 22 December 2014. On 6 January 2015, Holly told Eastwest that her financial circumstances had changed due to her redundancy and she was unable to afford her loan repayments. Holly said she was unemployed and had no income as she was unable to receive assistance from WINZ until after a 6 – 12 week stand down period. Holly said that she was applying for jobs and hoped to be employed shortly. However, applying for jobs at that time of the year had been difficult because of the holiday season.

Holly asked Eastwest to assist her through the hardship period by putting her loan repayments on hold.

On 16 January 2015 Eastwest told Holly that it had granted her hardship application for the lesser of 7 weeks, or until she found employment. Eastwest confirmed that Holly’s next loan repayment would be due on 4 March 2015.

On 23 March 2015, Eastwest contacted Holly because it had not received loan payments from her since 8 January 2015. Eastwest asked Holly about her plan to make payments. Holly replied the following day requesting a hardship extension. She also emailed Eastwest’s credit committee requesting a hardship extension on 25 March 2015.

On 16 April 2015 Eastwest issued a pre-possession notice.


Holly’s position

Holly complained that Eastwest made several mistakes dealing with her hardship application.

Holly said that Eastwest did not respond to her emails on 24 and 25 March requesting a hardship extension. She said that when she did not receive a response she assumed that Eastwest had accepted her hardship extension.

Holly also said Eastwest:

  • was wrong to decline her hardship extension
  • should not have issued her with a pre-possession notice
  • should have provided her with a disclosure of the variation of the loan contract as a result of her hardship application.

Holly believed that Eastwest was treating her badly because she had lodged a personal grievance in her employment dispute against it and was using the situation with her loan to ‘bully’ her.


FSCL’s position

We found that Holly’s complaint should be partially upheld

It was outlined clearly to Holly in the email dated 16 January 2015 that the hardship period was for 7 weeks (until 4 March 2015) or, earlier if she was able to gain employment. Unfortunately, Holly did not contact Eastwest before 4 March 2015 to advise that her financial circumstances had not improved. In our view it would have been prudent for Holly to do this. At the same time, Eastwest should have responded to Holly’s emails dated 24 and 25 March 2015 in which she sought an extension. Eastwest should have told Holly that it had not extended her period of hardship.

We accepted that receiving a pre-possession notice would have been stressful for Holly especially when she held the view (albeit mistakenly) that the period of hardship continued. Eastwest should have warned Holly that if payments were not made it would issue her with a pre-possession notice.  For this reason, we found it appropriate that Eastwest should compensate Holly for the stress caused.

We found that it was reasonable for Eastwest to not extend the period of hardship. The purpose of a contract variation on the grounds of unforeseen hardship is to give temporary relief where a borrower is in financial difficulty. Eastwest could not indefinitely allow Holly not to pay her loan while she was looking to gain employment. Further, we thought that 7 weeks was a reasonable period for Holly to find some employment.

We considered that it would have been best practice for Eastwest to provide Holly with variation disclosure outlining full particulars of what effect that variation had on the length of the loan, among other things. Eastwest should have also provided Holly with the process around when the hardship period was coming to an end and its process for customers re-applying for variation. Arguably, if Eastwest had provided proper variation disclosure, Holly’s complaint could have been avoided.

We found it appropriate in the circumstances for Eastwest to credit $250 to Holly’s outstanding balance in recognition of the stress caused by issuing the pre-possession notice and for not providing full variation disclosure.


We found insufficient evidence that Eastwest bullied Holly.