In 2012, Gordon took out a loan to purchase a vehicle. The loan was for $59,773, and the total to pay over the life of the loan was $79,342.
Gordon’s payments dishonoured from the beginning and, over the years, Gordon entered into a number of repayment arrangements with his lender.
On 27 January 2016, Gordon received a pre-possession notice (PPN) from his lender. The PPN said it would expire 60 days after Gordon received it. On 6 April 2016 (71 days after Gordon received the PPN), the lender repossessed the vehicle.
Gordon complained to FSCL that the lender should not have repossessed the vehicle, because the 60-day period had passed. Gordon assumed the PPN had expired and he did not expect his vehicle to be repossessed.
As at 17 May 2016, Gordon remained in arrears of $10,015 and the balance to pay was $50,093.
The lender’s view
The lender originally said the PPN expiry period only applies to loans taken out after June 2015 when amendments to credit laws became effective. As the loan was taken out in 2012, it meant the PPN issued on 27 January 2016 did not expire and was correctly relied on to take repossession action on 6 April 2016.
However, after receiving legal advice, the lender noted that notwithstanding when the loan was taken out, because the PPN stated it would expire in 60 days, the repossession needed to occur in that period. The lender returned Gordon’s vehicle on 28 May 2016 with a view to re-issuing a PPN and repossessing the vehicle again.
Further information from Gordon
Gordon said that:
a) There were items in the vehicle when it was repossessed worth about $1,065 which Gordon considered he should be reimbursed for.
b) He was due to receive a $6,500 cheque from the Ministry of Justice which he intended to put directly towards the loan arrears.
c) He was on a benefit receiving $441 per week, and he cared for his mother full time and supported her. Although he had entered into several repayment arrangements over the years, he had been unable to stay out of arrears. However, if his vehicle was sold this would put more pressure on him because he would be unable to purchase another vehicle, making it hard to care for his elderly mother.
d) He understood that if the car was sold the remaining balance on his loan would be frozen. However, Gordon would prefer his vehicle not to be sold. Gordon wanted the lender to write off his arrears balance and allow him to pay the debt at $700 a week.
e) He experienced considerable inconvenience during the 7 weeks the vehicle was repossessed and he felt the lender should have apologised. Gordon said he incurred the additional expense of having to rent a vehicle on occasion, and had to pay $24 a week to transport his mother to and from her day care.
Further information from the lender
The lender said that although repossessing the vehicle on 6 April 2016 was a technical breach of the PPN, the repossession should not have come as a surprise to Gordon. It had warned Gordon several times it was going to repossess the vehicle in early 2016 if he did not make good on his promises to make loan payments.
The lender declined to restructure the loan as it had already done this a number of times. This included an instance of incorporating arrears of $3,539 into the loan as a result of an unforeseen hardship application. The lender noted that it had not received any payments towards the loan from Gordon in 6 months. The lender’s position was deteriorating, with interest continuing to accrue and with the vehicle continuing to diminish in value.
Our view
We sympathised with Gordon’s difficult financial position and noted caring for his elderly mother would become more difficult if he no longer had a vehicle.
We also appreciated Gordon would have been inconvenienced by having his vehicle repossessed. However, we considered most of the stress and inconvenience was actually caused by Gordon. If he had kept to the agreements he made with the lender, his vehicle would not have been repossessed. We said the lender took reasonable action to rectify its error in relation to the PPN by returning the vehicle.
It was also clear that Gordon was unable to pay his loan, after several attempts by him and the lender to negotiate a suitable payment arrangement. Ultimately the lender needed to ensure the debt was paid.
In our view the best option was for the vehicle to be sold, with the proceeds of sale being applied to the balance of the debt. This would result in the debt being frozen and Gordon could pay the balance over time. We considered the lender had done all it could to assist Gordon and it was not reasonable for its financial position to be prejudiced any longer.
Gordon provided evidence of the items in the car amounting to $236.59. We said it was reasonable for the lender to deduct this amount from the balance of Gordon’s debt.
Gordon did not accept our view and said he would be referring the matter to his solicitor.
Our insight
This complaint was about a loan entered into before the changes to the Credit Contracts and Consumer Finance Act 2003 in 2015 bringing into effect the responsible lending regime. Considering Gordon fell into arrears very soon after taking out his loan, if his loan was taken out after June 2015, we may have looked into whether the lender loaned to Gordon responsibly.
