When lending goes hay wire

Tom borrowed money from a finance company to buy a hay baler.  Tom could not repay the debt and surrendered the bailer to the finance company to be sold.  Tom said when he delivered the bailer it was in good condition.

 

Hay baler voluntarily surrendered to finance company

The finance company moved the baler to an auction yard, and put it up for sale on Trade Me.  When Tom looked at the Trade Me photographs of the baler he was shocked to see damage to the tow bar.  The damage would reduce the value of the baler.  Tom was extremely worried the baler would sell for a lot less than his $65,000 debt to the finance company.  Tom asked his father, Philip, to help. 

 

Relationship with finance company deteriorates

Philip tried to negotiate with the finance company, but the relationship quickly deteriorated.  Philip said the baler was damaged while in the finance company’s care and now the finance company just wanted to sell the baler as quickly as possible, knowing Tom would never be able to repay the residual debt.  Philip said the finance company’s callous attitude was having a detrimental effect on a young farmer.

The finance company said the baler was damaged when it arrived. The company denied responsibility for any damage caused to the baler. The debt was legitimately owed and Tom was trying to avoid his obligations.

 

Review

After reviewing the file, we asked Philip how he would like to see the complaint resolved.  Philip said he would pay $45,000 for the baler in its current condition if the finance company would remove its security.

While the finance company still did not accept the damage occurred while the baler was in its care, it was open to negotiation.  The finance company advised Tom owed approximately $9,000 on another loan, and offered to accept $54,000 in full repayment of all Tom’s debts.

 

Outcome

Tom and Philip accepted the finance company’s offer, and the complaint was settled on this basis.

 

Our insight

Without photographs of the baler when the finance company took possession it would have been extremely difficult for us to determine how the damage occurred.  We were pleased to see all concerned prepared to find a pragmatic solution they could live with.