Suravi topped up her loan with the lender in 2018, paying the loan in monthly instalments. At the same time, she purchased repayment waiver cover to protect her against sudden illness.
Later in the year, Suravi was hospitalised due to illness and was not able to work for a month. Suravi notified the lender in mid-June about her illness, but did not complete her claim form until the end of June. Suravi returned to work in late July.
The lender approved the claim in early July and credited Suravi’s loan for the July payment. Suravi wanted the June payment to be included but the lender refused to do so and cited a stand-down period included in her policy.
Suravi complained to FSCL that the lender should have also credited her June payment when the lender paid her claim.
Suravi argued her cover was out of line with similar types of repayment waivers offered by other companies. Suravi wanted the lender to cover payments from when she became ill, rather than when she made her claim.
Suravi also argued that the stand-down period was an unfair contract term under the Fair Trading Act. Finally, Suravi alleged that the repayment waiver was not fully explained to her.
Policy stand down period
We looked at Suravi’s waiver which was a comprehensive repayment waiver.
We found the waiver’s wording was clear and unambiguous. Suravi was not entitled to a loan credit for the months before she made her claim and the months after she returned to work. It was irrelevant that other repayment waivers may have more extensive cover.
Unfair contract terms
The unfair contract terms law did not assist Suravi. We considered the stand down period in Suravi’s repayment waiver was part of the main subject matter of her payment waiver and was an “exempt” term from the unfair contracts law.
Explanation of the policy
We found that the lender had correctly disclosed all of the terms of Suravi’s waiver. Suravi had been provided with both a hard copy and an electronic copy of her waiver to read through.
Suravi did not respond to our decision and we assumed she had discontinued her complaint.
Insights for consumers
It is best practice to read your repayment waiver prior to taking out a policy. This is more important when you are taking out cover for a large personal loan as the consequences of not having cover could be very harsh. If you are in doubt or do not understand the key aspects of your waiver, (such as how will I be covered in an illness situation), it is best to ask your lender for clarification.