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I can’t afford my loan payments – was my lender irresponsible?

Hu applied for a loan to buy a new car in 2019. As part of the loan application process, the lender asked Hu to submit 90 days of bank statements. Hu submitted copies of his bank statements and other documents the lender requested, and the loan was approved with an interest rate of 23.95 % per annum.

Initially Hu had no issues making his weekly loan repayments, but in August 2020 he lost his job due to the COVID-19 pandemic. Hu contacted his lender and advised them of his current situation. Hu also complained that the loan was unaffordable from the start, and that the interest rate was too high.

Hu’s lender reviewed his complaint and advised him that they could discuss a new payment arrangement due to the impact of the pandemic. The lender also told Hu that they had reviewed his loan application and bank statements, and they did not agree that the lending was irresponsible.

The lender told Hu that his credit profile and the fact he had a learner’s driver licence were some of the reasons for the relatively high interest rate they had offered him. Hu was not happy with this response, so he referred his complaint to FSCL.


Hu thought the loan was unaffordable from the beginning and that the lender had not complied with the responsible lending obligations under the Credit Contracts and Consumer Finance Act 2003 (the Act). The lender disagreed and said they would not make any changes to the loan agreement (such as reducing or waiving interest and fees).

Hu also believed that the interest rate was too high. The lender argued that Hu had accepted the interest rate they offered, so they didn’t see any reason to reduce it.


We reviewed the bank statements and documents Hu submitted to the lender with his loan application to check that the lender had conducted a proper affordability assessment. It wasn’t clear from Hu’s bank statements what his actual income was due to the way some of the credits to his bank account were labelled.

We could see one salary payment, but the source of the other income in Hu’s bank statements wasn’t clear. We asked the lender and Hu to clarify what his job and income were at the time Hu applied for the loan. We also invited the lender to make an offer to resolve the complaint.

Once we received more information about Hu’s income, it was clear that the loan was affordable at the time Hu took it out.

Even though we found that the lender had acted responsibly, the lender made an offer to restructure the loan, reduce the interest rate, and adjust the weekly repayment amount to an amount Hu could afford.


Hu asked us if we believed that the lender’s offer was a good one, and we told him it was. Hu accepted the offer, and the loan was restructured.

Insights for consumers and participants

A borrower’s circumstances can change during the term of their loan and the loan repayments may become unaffordable.

When FSCL reviews a complaint about irresponsible lending, we need consider whether a loan was affordable for a borrower at the time they took it out. If the loan was affordable initially, and the lender complied with their other lender responsibilities, it is unlikely we would find the lender had breached the Act.

As a borrower, if your circumstances change, such as losing your job, we recommend you speak to your lender straight away – to let them know and discuss any financial hardship options.

Before entering into a loan contract, borrowers should make sure they read the terms and conditions carefully. If a borrower agrees to the interest rate a lender offers, then it is fair for the lender to charge that interest. In this case, Hu’s lender was very generous by offering to reduce the interest rate on his loan – FSCL couldn’t have required them to do this.