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Mobile traders and mobile debt

Jodi was really confused. She had received a letter from a debt collection company demanding payment of $900. As Jodi had limited understanding of financial matters, she authorised her sister, Whina, to help.

Whina discovered the debt related to a phone Jodi had bought from a mobile trader. Because Jodi had failed to pay the weekly payments of $30, defaulting on the loan almost immediately, she had not received the phone. When Jodi failed to respond to the mobile trader’s demands for payment, the mobile trader sold the debt to the debt collection company. Whina asked the debt collection company to explain how the mobile trader satisfied itself that Jodi could afford the payments.

The debt collection company contacted the mobile trader for information. The mobile trader was unable to provide any information to show that Jodi could afford the payments, but did give the debt collection company a statement that Jodi signed agreeing that she could afford the purchase without incurring any hardship.

Whina contacted us, on Jodi’s behalf, saying that the mobile trader had not satisfied its responsible lending obligations, and because the debt had been sold to the debt collection company, Whina believed the debt collection company should now be responsible.

After we referred the complaint to the debt collection company’s internal complaints process, the debt collection company passed the debt back to the mobile trader. The debt collection company, on behalf of the mobile trader, immediately issued a notice of intention to commence legal proceedings.



Whina came back to us, very worried about the threatened legal action. Whina was concerned that the mobile trader would delay responding to the complaint, and in the meantime her sister would have to appear in court.



Because the mobile trader had not yet had the opportunity to resolve the complaint directly with Jodi and Whina, we referred the complaint back to the mobile trader’s internal complaints process. We alerted the mobile trader and the debt collection company to the provision in our terms of reference (rules) preventing them from commencing legal action once a complaint is lodged with us and remains unresolved.



The mobile trader responded immediately, confirming debt recovery action was on hold and that it would investigate and respond to Whina’s complaint. The mobile trader promptly agreed to write off Jodi’s debt and take no further legal action. Both Whina and Jodi were satisfied with this response and discontinued their complaint.


Insights for participants

Although it was great that this complaint was resolved so quickly, it is concerning to see a lender:

  • believing it can satisfy its responsible lending obligations by asking a borrower to sign a statement confirming they can afford the payments
  • commencing legal action while a complaint is with us.

We remind participants that:

  • before lending they must undertake a thorough and documented process showing that the borrower can afford the loan repayments without suffering financial hardship
  • a collection company will be responsible for lending decisions made by the original lender
  • once a complaint has been lodged with us, they cannot commence legal action without our Chief Executive Officer’s permission.