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Struggling to make ends meet

Rangi’s representative complained to the lender that Rangi’s car loan was not affordable, and that he did not understand the add-on repayment waivers he took out with the loan.

The representative explained that before Rangi took out the car loan, he was struggling financially. He was working extra hours to make ends meet, he had dishonoured payments to multiple lenders, and he had a low credit score.

After Rangi took out the car loan, he began missing his home loan repayments and he had to cut down on food expenses.

The lender said Rangi met their affordability criteria. They considered Rangi’s credit score, but they looked at his overall financial situation when they approved the loan. The lender said they did not know that Rangi had fallen behind with his other debts because there were no dishonoured payments on his bank statements.

The lender also said Rangi had been happy to proceed with the repayment waivers.

The representative was not satisfied with the lender’s response and asked FSCL to investigate the complaint.


The representative wanted the lender to waive all interest and fees on the loan, refund the cost of the waivers, and agree to an affordable repayment amount for the residual debt Rangi would be left with.

The lender declined this request. They maintained that they had met their responsible lending obligations under the Credit Contracts and Consumer Finance Act 2003. The lender had calculated that Rangi had a budget surplus after allowing for his debts and essential expenses, such as food and power.

The lender believed the extra hours Rangi was working when he applied for the loan did not mean he was experiencing hardship. There are many factors for why someone may work long hours, such as workload.


When we reviewed the lender’s affordability assessment, we had concerns that we wanted to discuss with the lender. For example, that:

  • the lender may have understated the amount of Rangi’s home loan repayments (they had used the amount of the last repayment but all prior amounts on the bank statements were higher)
  • the lender had not taken into account the rates for Rangi’s home
  • the amount allowed for food seemed low.

In response, the lender decided to make an offer to resolve the complaint. They offered to waive all interest and fees on the loan and accept affordable repayments for the residual debt. This offer was consistent with FSCL’s general approach in cases where we find that a lender did not meet their obligations to make reasonable inquiries, to be satisfied that it was likely the borrower would make the loan repayments without suffering substantial hardship.

The lender did not agree to reimburse the waivers Rangi had purchased because they had disclosed that they were optional and Rangi had chosen to buy them.


Rangi initially declined the offer because he wanted the waivers reimbursed. The representative acknowledged that the loan agreement Rangi signed disclosed that the waivers were optional, but the representative believed this should also have been disclosed verbally when the lender called Rangi to explain the loan agreement before he signed it.

After the representative spoke with the FSCL case manager, Rangi decided to accept the offer. We encouraged Rangi to balance the certainty of reaching an agreed outcome with the lender, against the uncertainty of what the outcome would be if FSCL were to continue to investigate the complaint and make a decision on it.

While we had concerns about the affordability assessment, we did not have enough information to give a view on whether the complaint may be upheld. We would have needed more information from the lender about how they had assessed the loan and more information from Rangi about his financial situation at the time he applied for the loan.

We would also have needed to investigate whether there was evidence, other than in the loan agreement, that the lender (or car dealer) had told Rangi that the waivers were optional. In any event, we would probably have placed weight on the fact the optional nature of the waivers was clearly disclosed in the loan agreement, including in a key information summary, and that Rangi had time to read the agreement and ask the lender questions about it before he signed it.

Insights for consumers and participants

It was great to see the borrower and lender both prepared to compromise in the interests of reaching an agreed outcome on the complaint.