The complaint
Richie contacted FSCL in mid February 2015 about a complaint against his finance company, Local Finance. Richie said that he took out a loan with Local Finance in 2013 for around $25,000 to purchase a vehicle from a car yard. Richie then fell ill with cancer and spoke with Local Finance about entering into a reduced payment arrangement in late 2013/early 2014. Richie said that he reduced his payments from $280 per week to $100 per fortnight and then later increased his payments to $150 per fortnight. Richie said that he had recently been told that he owed $56,000 to Local Finance and was then told another figure of $61,000.
Richie said that when he made the reduced payment arrangement with Local Finance he thought it meant there would be a period when no interest accrued. Also, Richie said that he and his guarantor, Helen, were unaware that Helen’s property was used as security for the loan. Richie understood that Local Finance had recently placed a caveat over Helen’s property and was looking to take action to have the property sold. Richie said he had understood that the only security for the loan was the car he was purchasing, and a caravan.
Richie said he had been treated unfairly by Local Finance because the quoted balance of his debt was too high. Richie also said that Local Finance did not explain the extent of the security for the loan when he signed the credit contract. Lastly Richie said that he offered to settle the debt by paying $50,000 from the sale proceeds of Helen’s house, which Local Finance would not accept.
FSCL refers the complaint to Local Finance
Local Finance said it was aware of Richie’s complaint and it had been dealing with the issue for 12 months. Paul said all the information Richie had provided was incorrect and that the original loan was for over $52,000. Local Finance said that Richie just ‘did not want to pay’.
Local Finance also said that Richie had sold the vehicle back to the car yard and since then had said that ‘everything was Local Finance’s fault’. Local Finance was not willing to accept Richie’s offer to pay $50,000 from the sale of Helen’s house because the balance of the debt was currently $65,000. Local Finance said it works with borrowers all the time when they face financial hardship, but that Local Finance felt it could do no more to assist Richie.
FSCL begins the investigation
We began our investigation. A few days later Richie contacted us and said that Helen’s house was on the market. Richie said that the house should be able to be sold in the next few weeks and wanted Local Finance to stop applying interest to the debt.
Later, Local Finance contacted us and advised that Helen had sold her house and it had made a commercial decision to ‘take a haircut’ of around $20,000 as the amount to be paid from the proceeds of sale was only about $50,000.
We then contacted Richie who confirmed that an agreement had been reached that $58,000 would be paid from the proceeds of sale in full and final settlement of his debt to Local Finance. Local Finance confirmed that it would not be pursue Richie for the balance of the debt. The complaint was resolved within 20 working days. Local Finance’s decision was a sensible one from a commercial viewpoint meaning that Local Finance would see most of the debt repaid in a lump sum within a short space of time.
