In 2003 Kate borrowed money from a finance company to buy a car. Kate did not repay the loan and the car was repossessed and sold leaving a debt of $10,000. The finance company obtained a court judgment against Kate for $13,000. The court ordered Kate to repay the debt at $120 a fortnight.
Over the years Kate made sporadic payments and after her payments stopped again in 2012 the finance company sent the repossession agents to her home. Kate was at the hospital giving birth so the repossession agents left. Three weeks later the repossession agents were back with an instruction to either:
- get Kate to pay $500 immediately in a lump sum followed by payments of $50 a week or
- take all her goods including her beds, fridge, freezer and washing machine.
Kate was able to give the finance company $400 and agreed to pay $50 a week and the repossession agents left.
Kate did not think it was fair for the finance company to threaten to repossess her goods and she could not afford to pay $50 a week. The finance company said a power of attorney clause in the loan agreement allowed it to repossess Kate’s goods and it threatened to do so because her payment history was ‘less than perfect’.
We looked at the loan agreement Kate signed in 2003. The only security for the loan was the car Kate bought in 2003. The loan agreement did not give the finance company security over Kate’s other property. Although Kate owed the debt we did not agree the power of attorney gave the finance company the right to repossess her property. The power of attorney was limited to protecting the rights granted by the loan agreement. Without an ‘all present and after acquired property’ and ‘appropriation’ clause in the loan agreement the loan was unsecured and the finance company could not use the power of attorney to repossess Kate’s property.
We were also concerned the finance company had charged interest and costs after the car was repossessed. Section 35 of the Credit (Repossession) Act 1997 says the finance company does not have the right to add any further costs or interest to the loan after the security is sold. We considered the finance company was wrong to have threatened repossession and had caused Kate extreme inconvenience, distress and hardship.
We agreed Kate owed the finance company a debt and said the starting point of that debt was $13,000 (the amount set by the court) and deducted from this amount:
- all payments made by Kate, about $3,500
- all costs added to the debt since April 2010, about $700
- $500 in recognition of inconvenience caused by the threatened repossession.
This left Kate with an interest free, unsecured debt of about $8,300. We suggested the finance company allow Kate to repay the debt at an amount she could afford.
Unfortunately Kate did not respond to our letters or telephone calls and we discontinued our investigation.