Alice borrowed $30,000 to buy a car, to be repaid over five years. For the first two years everything was fine but, when Alice lost her job, the payments stopped and Alice disappeared. The lender had two repossession agents looking for Alice in three different cities. The lender issued a repossession warning notice but, because it was unable to find either Alice or the car, the notice expired before the car could be repossessed.
Eventually one of the repossession agents, Jim, found Alice and said that she needed to pay $6,000 to stop the car being repossessed. Alice texted Jim a screen shot from her bank account showing the $6000 had been paid. Jim said he would let her know when the money had cleared.
Later that same day, the other repossession agent, Shaun, spotted Alice’s car. Although Shaun was aware of Alice’s text conversation with Jim, he did not believe she had paid the money so repossessed the car anyway.
When Alice contacted the lender, it agreed to return her car provided she paid arrears of $800 and the storage costs.
Alice disputed the arrears and did not think that she should have to pay the storage costs. Alice complained to FSCL.
Alice said the lender should not have repossessed her car because she had paid the arrears as advised by Jim. Alice also said that the lender had failed to follow the correct repossession process because it had not issued a new repossession warning notice when the first one expired. Alice said the lender should reverse all the repossession and storage costs.
The lender said its decision to repossess the car was reasonable because the loan was in default and the vehicle was ‘at risk’ under section 83E of the Credit Contracts and Consumer Finance Act 2003. Although Alice had paid $6,000 as advised by Jim, the loan was still in arrears because Jim had failed to include Shaun’s repossession costs in the outstanding arrears. The lender did not agree that Alice’s text was sufficient proof of payment, as she had made numerous promises to pay in the past.
To resolve the complaint the lender offered to reduce Alice’s debt by $380, being Shaun’s repossession costs.
While we agreed that the car was ‘at risk’, because it appeared that Alice was moving the car around to avoid repossession, we did not agree that the loan was in default. Alice had asked Jim what she needed to pay to avoid repossession, Jim advised her $6,000 and Alice paid $6,000. If Jim failed to include Shaun’s repossession costs this was not Alice’s fault. In our view that Shaun should not have repossessed the car.
We proposed to recommend that the lender:
- reverse all the costs relating to the repossession
- cover the storage costs
- advise the arrears outstanding on the loan
- give Alice 15 working days to pay the arrears in full
- and, once Alice had paid the arrears, return the car.
While the lender reluctantly accepted our decision, Alice did not. Alice did not accept the arrears calculation. Alice went on to say that because the car’s warrant of fitness and registration had lapsed while in the lender’s possession, the lender should cover the cost of transporting the car to Alice’s chosen garage to arrange for a new warrant of fitness.
The lender provided more information about its arrears calculation, which Alice accepted to be correct. However, the lender declined to cover the transportation costs, saying the garage storing the car could issue a new warrant. Alice did not trust the lender’s garage and said that she did not accept the proposed recommendation.
We reviewed the complaint again and issued our recommendation, the final step in the process. We confirmed our earlier decision and said it was not reasonable for the lender to cover the car transportation costs.
Alice then went to the garage and viewed the car. After meeting with the mechanics, Alice was happy for them to assess her car. Alice accepted our recommendation and the complaint was resolved.
Insights for consumers
If you are having problems repaying a loan and you think the lender wants to repossess your car it is never a good idea to go into hiding. Moving the car around leads a lender to conclude that you intend depriving them of their security, allowing the lender to treat the car as ‘at risk’. If the car is at risk the lender can repossess without following the usual repossession warning notice process which gives you 15 days to pay the arrears – hopefully avoiding the kind of confusion that happened in this case.