Lender decides not to pursue a co-borrower on compassionate grounds

Bella was in a long-term, violent, relationship with Steve. When Steve asked Bella to sign a loan agreement as a co-borrower, so that he could buy a car, she felt she had no option but to agree. Bella never saw the car, saying it went to one of Steve’s associates. Bella thought nothing more of the transaction.

Eventually, Bella and the children were able to leave Steve. However, Bella had never worked, had no qualifications, and struggled financially.

When Bella asked a financial mentor for help, the financial mentor noticed that a lender had an attachment order from the court on Bella’s benefit income. Bella was paying $30 from her benefit income each week to the lender, pushing her budget further into deficit.

Bella did not know anything about the debt, so the financial mentor asked the lender for information. The lender explained that Bella was a co-borrower under a loan that she and Steve had taken out to pay for a car. The lender had applied for the attachment order on Bella’s benefit when Steve’s payments stopped, and they were unable to find him.

The financial mentor asked for information about the lender’s decision to include Bella as a co-borrower because she could not understand how the lending could have been affordable for Bella. The financial mentor also asked the lender to stop the deductions from Bella’s benefit while she reviewed the information. The lender gave the financial mentor some information but could not give her any information about Steve without his consent.

The financial mentor felt she was not making any progress with the lender so referred Bella’s complaint to FSCL.


The lender maintained that they assessed Bella and Steve’s application as co-borrowers and, although Bella was not earning an income, Steve’s income was sufficient to repay the loan. The lender did not accept that the lending was irresponsible but agreed to stop the deductions from Bella’s benefit while we looked at the complaint.

The financial mentor remained of the view that Bella should never have been included as a borrower. She brought nothing to the transaction and had no ability to repay the debt. The financial mentor said that the lender had not met their responsible lending obligations under the Credit Contracts and Consumer Finance Act 2003 so far as Bella was concerned.


Although the lender did not know about Bella’s personal circumstances when accepting her as a co-borrower, we also wondered why she was included as a co-borrower. Given that Bella had never worked and was responsible for caring for the couple’s children it seemed to us unlikely that she would have any ability to contribute to the loan payments.

We were also concerned that Bella, a survivor of domestic abuse, now responsible for a large family, was suffering further hardship because the deduction from her benefit was leaving her without money to feed and care for her children.

Bearing these factors in mind, we asked the lender if they would review their position.


The lender maintained that their original lending decision was responsible but agreed that, given Bella’s circumstances, they would no longer pursue her for the debt. After further prompting from the financial mentor and FSCL the lender also agreed to refund the $2,500 they had deducted from Bella’s benefit under the attachment order.

Bella and the financial mentor were very pleased with this outcome.

Insights for participants

We were delighted to see the lender doing the right thing in this situation. Sometimes it is better to put aside the legal position and agree to a compassionate solution that will allow the borrower to move forward.