The text message
Gerrard had taken out a number of previous loans from a payday lender. On Friday 17 April 2015, Gerrard received a text message from the lender saying: “Great News! Your current credit limit is up to 500 – please send a text to XXXX”.
Gerrard thought the text message meant he was pre-approved for a loan up to $500 and he could choose the amount he wanted to borrow.
The car purchase
Over the weekend, Gerrard entered into an arrangement with Craig to buy a car. Gerrard had to pay a $1,000 deposit to Craig. He paid $500 cash towards the deposit and agreed to pay the $500 balance on Monday 20 April 2015, thinking he could borrow this from the lender.
Gerrard loses the $500
On Monday 20 April 2015 Gerrard texted the lender asking for the $500 loan. The lender texted Gerrard back to advise he had been approved for a $300 loan only. Gerrard called the lender to speak about him being $200 short on the deposit payment. The lender said there was nothing it could do about the situation. Gerrard tried to find the extra $200 to pay the full deposit but was unable to. Gerrard ended up losing the $500 part deposit he had paid to Craig on 17 April 2015 and wanted the lender to reimburse him for this.
Gerrard also said the situation caused him great embarrassment and humiliation and he wanted to be compensated a further $500 for this by the lender. Gerrard also wanted reimbursement for the interest on the $300 loan he had taken out ($127.50), $50 he spent on petrol trying to get the issue resolved, $80 for loss of his wages for an hour while he was trying to resolve the problem, and $20 spent on his phone and internet.
The parties’ arguments
The lender argued its loan terms and conditions meant it was under no obligation to provide any customer with a loan. It also argued the text message of 17 April 2015 was clear that the lender could approve a loan amount anywhere from $100 to $500, and had decided, based on Gerrard’s payment history, to grant him $300 in this instance.
The lender also said that on previous occasions Gerrard had taken out loans using the same process. That is, a text was sent to say he could seek a loan up to a certain amount, Gerrard asked for $X amount and the lender granted a loan for an amount less than what Gerrard sought. The lender also said Gerrard had not proved his loss on the car purchase.
FSCL’s review
We had to decide whether it was reasonable for Gerrard to be misled by the lender’s 17 April 2015 text. The text appeared to be quite definite – it said Gerrard’s credit limit is up to $500. It did not say ‘could be’ up to $500 or ‘subject to credit criteria’. The text was also sent soon after Gerrard had paid off another loan with the lender, so it was reasonable for him to expect he could be receiving a pre-approved offer to borrow more money.
It was also unclear why the lender had put an amount of $500 in the text if it knew it was always going to re-assess each individual’s circumstances.
We doubted whether Gerrard would have continued with the purchase of the vehicle if he thought there was a chance he may not be able to borrow the full $500.
We also noted that tje lender had later changed the wording of its text it sent to customers, which amounted to an acknowledgement the text could be misleading.
Our decision
We decided that Gerrard was misled by the lender’s 17 April 2015 text and lost the $500 part-payment of the deposit as a result. If Gerrard could provide evidence that he:
a) entered into an agreement to purchase the vehicle
b) paid the $500 deposit
c) lost that deposit
then the lender would need to reimburse the $500, and write off any interest/fees on the $300 loan Gerrard had taken out. Gerrard still needed to pay the $300 loan back.
We did not think Gerrard had suffered hurt and humiliation to the extent that the lender should be made to pay compensation for inconvenience. The fact Gerrard was unable to complete the vehicle purchase was unfortunate, but every day inconveniences do happen in life. Likewise, the petrol, phone and internet costs and the time off work were costs that Gerrard would have to bear.
The parties’ responses to our decision
Gerrard provided a letter from the vehicle seller confirming the sale and that Gerrard had lost the $500 part-payment of the deposit. Gerrard did not agree with our CEO’s decision not to make an award for inconvenience and stress.
The lender said it wanted to see a lot more evidence of the vehicle sale arrangement including a receipt for the $500 paid, the seller’s name and address so that FSCL could verify the arrangement, and evidence that the $500 had been withdrawn from Gerrard’s account.
Gerrard provides more evidence
Gerrard gave us a letter from Craig confirming the car sale and that Gerrard had lost the $500 part-payment of the deposit. Gerrard also gave us evidence to show that he had withdrawn the $500 in cash from his mother’s credit card account on 17 April 2015, and a receipt from Craig for the $500.
The parties reach a resolution
The lender then accepted our findings and paid Gerrard $200 in full and final settlement of his complaint. This was the $500 deposit Gerrard had lost, less the $300 loan amount still outstanding, and wrote off all the interest and fees.
