Soon after Sarah borrowed money to buy a car, she experienced financial difficulty and contacted a financial mentor for help. The financial mentor asked the lender for their loan affordability assessment. The financial mentor noticed that the lender had under-estimated Sarah’s rent when they included weekly rent as fortnightly rent in the affordability calculation and drew the mistake to the lender’s attention.

The lender agreed they had made a mistake and said that if Sarah returned the car they would refund all her loan repayments, nearly $6,500. The financial mentor called the lender and checked that the condition of the car would have no impact on the settlement offer. The lender said that the condition of the car was irrelevant to the offer they had made.

Sarah returned the car. Unfortunately, the car had some minor panel damage, the rear view mirror, side mirror, and car keys needed to be replaced. The lender then said they expected the car to be returned in the same condition it was in when Sarah borrowed the money. The lender estimated the repairs would cost $2,500 and wanted to deduct that amount from the $6,500 Sarah had paid.

Sarah and her financial mentor said that this was not what the lender had offered. In fact, the lender had said that provided Sarah returned the car, regardless of damage, the lender would return all the money she had paid. When Sarah and her financial mentor were unable to resolve the complaint with the lender, they referred the complaint to FSCL.


Sarah said the lender had made a mistake when assessing affordability, and that mistake had caused her significant financial hardship. She had sacrificed all her other financial commitments to repay the car loan. This meant relying on food parcels and cancelling her insurance. Sarah said the lender had offered to refund all the payments she had made provided she return the car to the dealership. Sarah kept her side of the deal, by returning the car, and the lender had broken their word.

The lender said they made a mistake when they said that the condition of the car was irrelevant to the settlement offer. The lender expected the car to be returned in the same condition it was in when Sarah bought it. The lender would now have the cost of repairing the car and it was only fair that Sarah contributes to that cost.


We accepted that the lender had made an unintentional misrepresentation when they told Sarah’s financial mentor that the condition of the car was irrelevant. However, we were not convinced that the misrepresentation had worsened Sarah’s position. Even if the lender had told Sarah that the repair costs would be deducted from the amount she had paid, we considered that Sarah would still have returned the car.

We then looked more widely at Sarah’s circumstances. The car insurance Sarah had arranged when she bought the car had lapsed because she could not afford the premiums. It was our view the cancellation of the car insurance was directly linked to the lender’s mistake when assessing loan affordability.

If Sarah had had car insurance, she would have paid an excess and the insurer would have paid the repair costs. In our view, it was fair for Sarah to pay $500 towards the repair costs, as a notional amount to reflect the insurance excess, and $600 for the replacement keys.

We also considered that Sarah had experienced inconvenience as a result of the misrepresentation. If the lender had correctly told Sarah that she would have to pay the repair costs there would have been no dispute, she would have received the money owed to her more quickly and been able to use that money to buy a cheaper car. We suggested the lender pay Sarah $250 as compensation for inconvenience.


We recommended that the lender deduct $1,100 from the $6,500 refund it was paying to Sarah and also pay Sarah $250 as compensation for inconvenience, a total of $5,650 as compensation. Sarah accepted the recommendation, and the complaint was resolved on this basis.

Insights for consumers and participants Our role is to provide a fair resolution to complaints. Sometimes a lender will make a mistake when assessing affordability. It was great to see a lender recognising their mistake and offering a settlement. Unfortunately, the lender made a further, unintentional, mistake when setting out the terms of that settlement offer. When something like this happens, we will look at all the circumstances of a complaint and determine what we consider to be a fair outcome.