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Lender not obliged to consider hardship request  

Niko’s company had an interest-only loan, secured by the company’s property. Niko lived in part of the property and he used the other part for his business.

When the loan matured (and the principal was meant to be repaid), the lender agreed to three extensions. Niko’s work had been affected by COVID-19.

The lender then agreed to roll over the loan, and a new loan agreement was signed in May 2021. The company now had to make principal and interest repayments. The loan offer and the loan agreement both said the loan was not a consumer credit contract.

Niko struggled to keep up with the repayments. His work continued to be disrupted by COVID-19. The lender said they would waive the principal part of the repayments, but Niko still struggled to pay the interest due.

In December 2021, the lender contacted Niko by email and text message to follow up on a missed payment. They also tried to call him the same day. The lender was disappointed they had to continually chase missed payments.

When the January 2022 payment dishonoured, Niko wanted to make a hardship application. The lender would not consider this. They said the loan was not a consumer credit contract. Niko disagreed and complained to FSCL.


Niko believed the loan was a consumer credit contract because the lender had said the loan was a commercial and consumer facility. Further, he lived at the property and he had guaranteed the loan.

Regardless of the status of the loan, Niko felt the lender should provide hardship assistance. The government had encouraged lenders during the pandemic to work with their clients.

Niko also said the lender harassed him when the December payment dishonoured, and he was concerned about default interest. The lender charged default interest from the day a payment was missed, but Niko recalled that default interest did not apply until a payment was 14 days overdue.

The lender maintained the loan was not a consumer credit contract, and they were not prepared to provide further assistance. They had already extended the original loan when it matured, rolled over the loan, and varied payment terms.


We concluded that the lender did not have to consider the request for hardship assistance.

The lender responsibility principle in the Credit Contracts and Consumer Finance Act 2003 about unforeseen hardship, and the hardship process set out in the Act, applies to consumer credit contracts (not all credit contracts).

The loan was not a consumer credit contract because the borrower was a company. The meaning of consumer credit contract does not extend to business or investment loans secured by a home or guaranteed by an individual.

The lender had not said the loan was a consumer credit contract. It appeared Niko had misread the lender’s offer. The offer and the loan agreement both said the loan was not a consumer credit contract. 

We also concluded that the lender’s contact with Niko in December did not amount to harassment. However, we noted that it is good practice for lenders to have policies around making spaced attempts to contact a borrower who has missed a payment.

There was no evidence the lender had made a mistake calculating default interest. Under the loan agreement, the lender could charge default interest from the due date of the missed payment.


Niko did not respond to our findings so we discontinued our investigation.

Insights for consumers

Lenders do not need to provide hardship assistance for business loans (unless the loan agreement includes hardship provisions). Many lenders will provide short-term assistance, but the lender’s decision about whether they will do this, or what assistance they will provide, are usually matters of commercial judgement.