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Lender relying on joint income for individual borrowing

In July 2020 Alice and her partner Marc went to a car yard to buy a new car for their family. Alice found a car costing $20,000. Because this was going to be Alice’s car, they wanted Alice to be the sole borrower. Alice and Marc gave the lender their pay slips and bank statements.

The lender calculated the couple’s joint monthly income of $7,105 and joint expenses of $3,969.35. The lender allowed the following monthly expenses:

  • $1,105 for rent
  • $684.32 for existing loan repayments
  • $1,680 living costs
  • $500 for the children.

The lender was satisfied Alice could afford the fortnightly payments of $370.

In November 2020 Alice contacted the lender to say she had reduced her hours at work and asked the lender to reduce the loan repayments. The lender calculated that the loan was still affordable on the reduced income.

Alice continued having problems with the payments, and in March 2021 said she had taken two weeks off work for a family emergency and would have difficulty making the payments. The lender said that because Alice had missed more than two payments, she would need to catch these up before they would consider a hardship application.

In May 2021 the lender accepted the hardship application and restructured the arrears into the loan balance. But by June 2021 the loan was again in arrears, and the lender arranged for a field visit to see what was happening with the loan. The lender’s agent advised that Alice was now on maternity leave. The lender agreed to restructure the arrears back into the loan balance but was unable to reduce Alice’s loan repayments.

Alice continued to have difficulty making the payments, and in June 2022 her mother-in-law, Janine, offered to help. Janine said it was important to the family that Alice keep the car and she was prepared to top-up Alice’s payments. When Janine became involved, the lender agreed to reverse some default fees and again restructure the lending.

Janine complained to the lender that something must have gone wrong with the loan because after two years Alice still owed the lender about $20,000, the same amount that she paid for the car. The lender was satisfied their records were correct and referred Janine to FSCL.


Janine said she could not understand how Alice could still owe the lender the same amount that she paid for the car two years earlier. Janine agreed that Alice had missed some payments, but it was not as if she had paid nothing.

The lender explained that although Alice had made some payments, the defaulted payments incurred additional interest and fees. The lender had restructured arrears into the loan balance, meaning that Alice’s debt had not reduced as quickly as if she was making regular loan repayments.


We looked at the account statements and were satisfied they were correct. Alice still owed about $20,000 because she had struggled to make regular repayments incurring default fees and interest. From time to time the lender had restructured the arrears into the loan balance, to stop the default interest and fees accruing, but it seemed to us the fundamental problem was that Alice could not afford to repay the loan.

We asked the lender why they had accepted Marc’s income when assessing affordability but had not included him as a co-borrower on the loan. The lender said that it appeared that the car was being bought as a family expense, and that it was easier to assess affordability for the family as a whole. However, the lender acknowledged that their approach has changed following the responsible lending reform in December 2021.

We then asked the lender to explain how they calculated the living costs, and the lender said the monthly living costs of $1,680 included the following weekly costs:

  • $200.30 for food
  • $28.60 for clothing
  • $45.60 for energy
  • $49.20 for health
  • $64 for transport costs.

We were satisfied the lender’s affordability assessment fell within acceptable limits and it appeared to us that other events had impacted Alice’s ability to repay the loan, like reduced hours of work, childcare commitments, and the birth of a new baby.

Alice did not meet the statutory requirements for hardship relief, but it appeared to us that the lender had done what they could to restructure the loan when Alice indicated her circumstances had changed.

However, we were concerned that the lender had relied on Marc’s income without including him as a co-borrower. While we were not prepared to say the lending was irresponsible, we were concerned that including Marc’s income without making it clear that the lender was relying on his income had contributed to Alice’s situation. It was our view that a fair remedy was for the lender to refund the default interest and fees that had accumulated over the life of the loan.

We were also concerned that Alice appeared unable to afford repayments of $370 a fortnight and offered to help negotiate a lower repayment amount. We asked what she considered affordable.

After discussing her financial situation with Janine, Alice decided to continue to repay the loan at $370 a fortnight. Janine was concerned that if Alice reduced her payments, the loan term would be extended meaning that Alice would pay more in interest and fees. Janine said she could afford to top Alice’s payments up to make the loan affordable.


Alice and the lender agreed to our proposal to refund the default interest and fees of $1,009.

Insights for participants

We acknowledge it can be difficult for lenders to assess loan affordability where a family share income and expenses, but the lending is to one member of the family. The December 2021 Responsible Lending Code provides some additional guidance.