Aihe is the owner and director of a trade business. In December 2022, Aihe applied for a small business loan of $150,000 from a lender. The repayments were $2,050 per week for two years. Aihe signed the loan agreement as a guarantor for her business. The business loan included a catch-all clause allowing the lender to use Aihe’s personal property as security for the business loan.
Two years later, Aihe fell into hardship and couldn’t make the repayments on her loan. She approached the lender for help, but they declined her hardship application.
She complained to FSCL.
Dispute
Aihe complained that she couldn’t afford to repay her loan, and the lender had declined her hardship application. She felt that the lender was being unhelpful, untruthful, and had been threatening her by saying that the missed payments would affect personal property. She said that they had no right to her personal home because the loan in arrears was a business loan.
The lender said that Aihe’s hardship application was declined because she didn’t provide all the information they needed. They also said that if Aihe was in hardship, they would be willing to work out an arrangement, but that if she continued to not pay, they were entitled under the loan agreement to start looking at her personal asset in order to recover the loan arrears. They said that they had not started looking into her personal assets yet.
Review
This complaint came to FSCL as two separate complaints.
We reviewed the first complaint in February 2024, which was based primarily on the lender declining Aihe’s hardship application. Aihe and the lender were able to reach a payment plan with the help of FSCL’s early assistance team.
We received the second complaint at the end of May 2024, which was primarily caused by Aihe’s confusion about the agreement reached in February 2024. Aihe had signed the February 2024 agreement in late May 2024, but had made changes to what the agreement said. The lender didn’t agree with the changes and never signed the February 2024 agreement. Aihe thought there was an agreement, the lender said there wasn’t an agreement.
When reviewing the second complaint in May 2024, we suggested that Aihe and the lender start afresh and look towards making a new repayment arrangement that they both agreed to. To settle the complaint, the lender offered to freeze Aihe’s loan, reduce the total balance by $2,500, allow $250 per week hardship payments for 12 weeks and then to reduce the remaining payments to $1,100 (from $2050) per week.
Resolution
Aihe agreed to the repayment arrangement suggested by the lender, and we closed our file.
Insights
It is important that both lenders and borrowers agree and communicate about the details of a payment arrangement at the time the agreement is reached.
This case is also a good example of a lender and a borrower working together to make a hardship payment arrangement that balances both the lenders and the borrower’s needs.
