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I can’t afford it!

Bruce visited a car dealership in July 2021 and purchased a car for $35,000. Bruce borrowed the money for the car from a vehicle finance lender.

The loan application form was filled out by a staff member at the dealership who spoke to Bruce. Bruce provided some bank statements and payslips, and the lender approved the loan. The total amount Bruce borrowed was $38,000 including some fees and add-on products like breakdown insurance.

Bruce’s repayments under the loan contract were $300 per week, and he missed the first payment. Bruce contacted his lender and let them know that he had reduced work hours due to the COVID-19 lockdown, so he would struggle to make his payments.

Bruce’s lender agreed to reduce the weekly repayments for four weeks as a result of Bruce’s unforeseen financial hardship. However, when ordinary payments resumed, Bruce could still not afford them.

Due to the growing outstanding balance on Bruce’s loan account, his lender sent him a repossession warning notice and disabled the car using the starter-interrupter that had been installed.

Bruce contacted a financial mentor who asked the lender for a financial hardship application form. With the financial mentor’s help, Bruce submitted a hardship application, and the lender agreed to reduce his repayments for three months. However, when ordinary repayments were meant to resume, Bruce still couldn’t afford them.

Bruce decided to return the car to the lender, which is called a ‘voluntary surrender’. The lender sold the car at an auction for $20,000, and this money was applied to Bruce’s loan account. However, due to the shortfall between the price Bruce paid for the car and the price it sold for at auction, as well as the interest charged under the loan contract, Bruce still owed the lender $20,000 – despite no longer having the car.

Bruce referred a complaint to FSCL because he thought the loan was never affordable.


Bruce said that the loan was not affordable. Considering his income even before the lockdown, and his weekly expenses, Bruce says there was no way he was ever going to be able to make weekly payments of $300 to repay the loan. Bruce’s wife wasn’t working, they had four children, and Bruce said that the lender didn’t consider all of the expenses he paid for his family. Bruce also said that the loan application form recorded that he was paying $100 for board, but that this was not correct – his rent was $500 per week.

The lender said that Bruce didn’t declare any children on his loan application form and that the loan was only in his name (not joint with his wife), so they only considered his personal expenses. The lender said that after assessing Bruce’s income and expenses, they were satisfied Bruce could afford the loan repayments.


We reviewed Bruce’s loan application form and the bank statements and payslips he gave the lender.

Despite the fact that the application form said Bruce was paying $100 weekly for board, we could see in his bank statements that he was actually paying $500 for rent. We could also see that Bruce had mentioned that he was married in the application.

We explained to the lender that under the Credit Contracts and Consumer Finance Act 2003, they were obliged to make reasonable inquiries into Bruce’s income and expenses, and they needed to be satisfied that Bruce would be able to afford the loan repaymentswithout suffering substantial hardship, before they approved the loan.

We found that if the lender had made reasonable inquiries, they would have seen that Bruce’s expenses, including his rent, were higher than they had estimated. Based on our assessment, the loan was not affordable, so we told the lender to credit back to Bruce’s loan all the interest and fees that were charged under the loan contract.

We explained to Bruce that while it was very unfortunate that he was left with a large loan balance even after the car was sold, we couldn’t ask the lender to waive any of the principal amount he still owed. We explained that, in most circumstances, even if a lender should not have provided a loan at all, the borrower will still need to repay the loan principal.

We told Bruce that having the car valued and then selling it at auction was a fair way for the lender to deal with the repossessed/surrendered car, and is what we would typically expect.

Lastly, we told the lender that they would need to agree to an affordable repayment plan with Bruce for the outstanding balance.


Our Financial Ombudsman issued a final decision on Bruce’s complaint, which Bruce accepted. The decision was then binding on the lender.

Insights for participants

Sometimes the information in an application form may not match what is shown in the borrower’s bank statements. Sometimes the information in a loan application form may seem unusual, such as a family of six people paying $100 per week in board, and raise a red flag for the lender.

Lenders need to ensure that they comply with the lender responsibilities outlined in the Credit Contracts and Consumer Finance Act 2003. This includes making reasonable inquiries into a borrower’s income and expenses before providing credit. If something raises a red flag, you need to ask the borrower for clarification.