In December 2013, Yvonne borrowed $13,995 to purchase a new car.
In July 2016, Yvonne was suffering from anxiety and depression and her doctor recommended that she took time off work to focus on her health. Yvonne’s partner worked, but Yvonne had been the higher income earner.
Yvonne contacted the finance company and asked if her repayments could be reduced until she was back at work. The finance company told her that she could apply for financial hardship. Yvonne sent the finance company:
- a letter outlining her reasons for experiencing financial hardship
- a budget from Presbyterian Support
- her bank statement for the period 11 May 2016 – 11 August 2016
- her partner’s bank statement for the period 12 May – 12 August 2016.
Yvonne’s budget sheet showed that she was receiving a benefit of $208 per week and that her partner earnt $547 per week. Their total household income was $755. The budget sheet also showed that Yvonne and her partner’s weekly expenses were $876.78, they were renting, and had over $64,000 in debt.
The finance company declined Yvonne’s hardship application, saying that she could only apply for hardship if there was “no income”. As Yvonne’s partner was still earning, the finance company considered that she could still afford to meet her weekly repayments of $156.50.
Yvonne complained to FSCL.
Our view
After investigating Yvonne’s complaint, we found the finance company should not have:
- issued Yvonne two repossession warning notices when a decision had not been reached on her hardship application
- declined Yvonne’s hardship application for the reason it did (that it could only accept a hardship application where there was no income)
- asked Yvonne to provide a budget sheet which showed only her income and expenses, excluding any household income or expenses
- told Yvonne that her budget sheet and bank account statements showed that she could still afford to meet her weekly car repayments
- declined Yvonne’s hardship application without telling her she could request a review of the decision by either FSCL or the Disputes Tribunal.
We also found some third party fees had been incorrectly charged to Yvonne’s loan account and should be reimbursed.
Sale of the car
Yvonne had stopped working in July 2016 but, by the time we were considering Yvonne’s complaint, it was November 2016. Yvonne said she would not be well enough to go back to work for at least a few more months.
While we agreed that the finance company’s assessment of Yvonne’s hardship application could have been much better, the financial hardship provisions are only intended to provide borrowers with temporary relief for temporary changes in their financial circumstances.
The change in Yvonne’s financial position was not temporary. It did not appear likely that Yvonne would be able to return to work in the near future. We suggested to Yvonne that the next best step may be for the car to be sold as, once security is sold, any residual debt crystallises. This means that no interest, default charges, or administration costs can be added to the residual balance.
Yvonne decided that the car should be sold and she delivered the car to an auction yard. By voluntarily surrendering the car, Yvonne avoided any repossession costs being added to her loan account and the car could be put up for auction straight away.
Outcome
At the time Yvonne’s car was sold, her loan balance was $9,998.66. The car was sold for $3,210.75 meaning that the residual balance owing on Yvonne’s loan account was $6,787.00.
We suggested that the finance company reduce the residual balance by $750 for the stress and inconvenience it caused Yvonne as a result of its poor assessment of her hardship application. We also said that the finance company should refund third party fees incorrectly charged to Yvonne’s account totalling $1,105.85.
The finance company agreed to reduce Yvonne’s residual loan balance by $1,855.85, leaving a balance of $4,931.15. Yvonne agreed to repay this amount in weekly instalments of $20, with the view to increase her repayments once she had returned to work.
