Layla had seen a car for sale in Auckland online, but she lived 1.5 hours away. Layla contacted the dealership and one of their team offered to pick her and her daughter up and drive them to Auckland so that Layla could look at the car. Layla said that she thought the employee would also drive her home again, but he said he wouldn’t. Layla had no other way to get home.
They arrived at the dealership at 5:30pm. Layla said she was given a lot of paperwork about buying the car and taking out a loan to buy a car. She drove herself and her daughter home in her new car from the dealership.
Layla struggled to pay the loan almost immediately after getting the car and only managed to make most of her loan payments by having her family members help pay them. That support meant that she only missed a couple of payments over the life of the loan.
Layla thought the loan was unaffordable and complained to FSCL.
Dispute
Layla complained that she felt pressured into buying a car after the dealer had picked her and her daughter up but then wouldn’t take them home. Layla also complained that the lender never checked to see whether she could afford the loan and hadn’t told her about the interest rate. She said that she had been originally paying with her ACC payments and the help of friends and family, but she wasn’t able to keep up with the repayments.
The lender said that Layla’s loan was affordable. They were unable to comment on whether the dealer had done anything to make Layla feel pressured to buy a car, but they said they were looking into it.
Review
We saw that the loan affordability assessment had incorrectly recorded Layla as paying $50 per week for board rather than the $240 per week that she was actually paying in rent, meaning that Layla had insufficient money in her budget to pay the loan payments. The loan was unaffordable. After discussing this with the lender, the lender offered to refund the fees and interest on Layla’s account and wipe the rest of her loan balance. We considered this to be a reasonable offer to resolve Layla’s complaint.
Resolution
Layla accepted the lender’s offer, and the complaint was resolved.
Insights for participants
Lenders should take reasonable steps to ensure that the information used for affordability assessments accurately represents the borrower’s financial situation.
We did not need to investigate or decide whether Layla had been unduly pressured into purchasing a vehicle, because the lender’s offer to resolve the complaint was reasonable to resolve her complaint. However, the alleged tactic by the dealership employee was concerning, and is something for lenders to be mindful of when they have car dealerships arranging lending to borrowers on their behalf.