While on holiday in 2015, Omar was convinced into purchasing vacation credits under a credit contract. This credit contract was for $21,000, to be paid back at $320 a month. When Omar got home to New Zealand, he realised that the amount he was expected to pay was far more than he had understood when he signed up.
Omar contacted the lender and attempted to cancel the contract. Omar was told that he could not cancel the contract, as the cooling off period had expired and the loan had become binding on him. Omar spoke to his bank and requested that his direct debits for the loan be stopped.
Omar’s account went into default and in 2016 the lender repossessed Omar’s vacation credits and resold them for $2000. The lender then lodged a default against Omar’s name for the remaining $19,000 owing on the loan.
Three years later when Omar attempted to buy a house, he found out at that the lender had lodged the default against his name.
Omar complained to FSCL. He disputed the default and complained that it was affecting his ability to get a loan to buy a house.
Dispute
Omar said that the lender had failed to properly disclose the payments and fees clearly, when the lender sold Omar the vacation credits. Omar further complained that deductions were made from his bank without his knowledge.
The lender disputed Omar’s claim and argued that it had clearly outlined the payment plan to Omar. The lender also claimed that it had done a thorough background check to ensure that Omar could afford the loan. The lender stated that when Omar purchased the vacation credits, Omar could afford to do so. The lender claimed that Omar only complained about the amount he owed when his financial position changed and that Omar’s change in financial position did not allow him to cancel his contract.
Review
On review of the evidence, we decided that the lender had properly disclosed to Omar the amounts he was required to pay, and that Omar was liable for that debt. We did find that the lender had failed to communicate effectively with Omar and that this had led to stress and inconvenience. We recommended that the lender deduct $500 in total from Omar’s loan as compensation for the stress.
We could not make any findings on whether the loan met the New Zealand Responsible Lending Code as the credit contract was overseas. We recommended that Omar take this issue up with the overseas financial complaints authority.
Resolution
Omar did not agree with our findings. After not hearing from Omar for a length of time, we closed his complaint.
Insights for consumers
It is important that consumers take the time to properly read and understand their credit contracts before signing up. Once the cooling off period has expired, the consumer will be liable for their full contractual obligations.