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I’m in hardship, help!

In 2020, Denise applied for a business loan to help get her new floral business up and running. Her lender approved a loan of $20,000, and the loan contract listed Denise’s residential home as security.

Denise signed the loan contract in her capacity as the director of her business and signed a personal guarantee accepting a security interest being registered against her home.

Denise applied for an additional $15,000 loan March 2021, and another $15,000 top-up in September 2021. Denise’s lender approved these additional loans, and the lending was restructured each time into a single loan contract. Each new loan contract included the same security interest against Denise’s home.

In January 2022, Denise fell ill and had to stop working. She began falling behind on her loan repayments, so she contacted her lender to ask for hardship assistance. The lender declined Denise’s hardship application because the loans were business loans, and under the law they were only required to assess hardship applications for personal loans to an individual(s).

Denise’s loan continued to fall further into arrears, and she was being charged default interest. Denise complained to FSCL about the lender not helping her and, after some negotiations, the lender waived all the default interest they had charged and agreed to a reduced loan repayment plan with Denise.

Six months later Denise complained to FSCL again. The lender had sent a letter explaining that they were intending to upgrade the caveat listed against her home to a mortgage – because she had not kept up with her repayment plan.


Denise said that she had only wanted personal loans rather than business loans, and that she did not want her home listed as security for the loan. She believed the lender had been unduly harsh on her in their dealings.

The lender disagreed and said that Denise had applied for business loans, with the agreement that her home would be listed as security. The lender explained that they had sent Denise the letter about the mortgage because she had not been making her reduced repayments.


We reviewed all of the emails between Denise and the lender, as well as the application forms, loan contracts, and diary notes. It was clear from these that Denise had applied for business loans and that she was aware of this fact.

We explained to Denise that the laws relating to unforeseen hardship relief didn’t apply because her loans were business loans, not personal loans (consumer credit). This meant that the lender was not required to consider a hardship application.

We told Denise that whilst we empathised with her position (she had fallen ill unexpectedly), we thought the lender had been fair in their dealings with her. The lender had waived all default interest and offered to negotiate another affordable repayment plan once again, after Denise failed to stick to the previous plan.

We explained that there were no grounds for asking the lender to remove their security interest, as this formed part of her agreement with them. The lender had sent Denise a letter explaining that they intended to upgrade the caveat listed against her house to a mortgage because she had stopped making payments altogether, and we told Denise that this was a reasonable step to take.

Moving forward, we told Denise that it was in her best interest to continue working with the lender to agree to a new payment plan, and to keep to it.


Denise accepted the findings in our decision and discontinued her complaint. She then contacted the lender to discuss her repayment options.

Insights for consumers

Some of the laws related to credit contracts (eg loans and credit cards) differ depending on whether the lending involved is for business or personal purposes. There are some extra protections and mechanisms in place when it comes to consumer credit (personal lending), that don’t apply to business lending.

Both business and personal loans can be secured against specific property (such as a house or car). It is important to understand that when you agree to give your lender a security interest under a loan contract, this gives the lender certain rights. If you fail to make the payments required under the contract, the lender may be allowed to take possession of the property and sell it in order to recover any money owed to them.