In June 2021, Chun and her partner applied for a loan to buy a car. The lender accepted Chun and her partner’s application and loaned them $30,000 to buy the car.
Just over a week after Chun and her partner took out the loan, Chun called the lender because she wanted to lower the loan payments. The next day, Chun told the lender that she could not afford to make that week’s payment.
In September 2021, Chun’s loan fell into arrears. Three months later, Chun lost her job.
In February 2022, Chun asked the lender for financial hardship assistance. The lender agreed to lower the loan payments for a period of three months. Chun asked the lender for financial hardship assistance again in July 2022, and the lender agreed to lower the loan payments until October 2022.
Chun made another financial hardship application in November 2022 because she was still struggling to find work. However, the lender declined Chun’s application because Chun’s previous financial hardship applications had extended the loan term considerably.
From late 2022 until July 2023, Chun made sporadic payments towards her loan because she was struggling to find work. During this period, Chun and the lender agreed to several ‘payment plans’, where the lender agreed to vary or reduce Chun’s payments slightly. However, Chun’s payments were inconsistent, so she could not keep up with the payment plans.
In July 2023, Chun complained to FSCL.
Dispute
Chun said that the lender would not agree to a reasonable payment plan to clear her outstanding debt.
The lender said that they could not accept Chun’s suggested payment plans, because Chun was not willing to pay reasonable amounts towards the loan each week. The lender also said that Chun’s previous payment plans had ended because Chun’s payments were inconsistent.
Review
We were concerned that Chun’s loan may not have been affordable when she applied for it, because Chun missed a payment almost immediately. Chun applied for the loan with her partner, so we reviewed the lender’s assessment of Chun and her partner’s income and expenses. We thought that the lender could have made further inquiries with Chun and her partner to get a more accurate picture of their financial situation before approving their loan.
We also reviewed Chun’s account statements and her emails with the lender to see whether the lender’s suggested repayment plans were reasonable.
Resolution
We found that Chun and her partner’s loan was affordable when they applied for it in 2021.
Though the lender’s assessment of Chun and her partner’s financial situation was lacking some information, Chun and her partner had enough money in their weekly budget to comfortably afford the loan.
We found that Chun was struggling to make her loan payments because her circumstances changed after she took out the loan. Chun lost her job and was struggling to find consistent work.
Our view was that the lender had done what they could to come to reasonable payment plans with Chun. Because of Chun’s change in circumstances, she could not maintain any of the payment plans she agreed to. We explained to Chun that it was reasonable for the lender to refuse the payment plans Chun proposed if they thought the weekly payments Chun was suggesting were too low.
Insights for consumers
Financial hardship assistance is designed to provide consumers with short-term assistance while they figure out how to make their loan payments going forward.
When you apply for lending, it is important to consider whether you may struggle to consistently make your loan payments if your circumstances change.
