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Where did my money go?

Awhina’s 25-year marriage had recently ended and she had moved in with a cousin. While her rent was paid directly from her benefit to her cousin, Awhina needed to cover all her other living costs from her remaining benefit of $185 a week. To save money, Awhina thought it would be cheaper to buy food in bulk and store it in the freezer.


Awhina borrows from a payday lender

Awhina applied for a loan of $150 to buy food from a payday lender. Awhina agreed to repay the loan in seven weekly payments of $48. Awhina successfully repaid the first loan, so borrowed a further $150 for food. Unfortunately, someone stole $100 from Awhina’s bank account the day the second $48 loan repayment was due to be deducted. There was not enough money to pay the payday lender and the second repayment was dishonoured.


Attempts at contact

Awhina tried to contact the payday lender by telephone, but whenever she tried the telephone lines were overloaded. Awhina did not have access to her computer so could not email the payday lender to explain what had happened. The payday lender was also trying to contact Awhina about the dishonour by email and text.


Loan default triggers $150 debit from bank account

Unfortunately, the $100 withdrawal was enough to upset the fine balance of Awhina’s finances and the next payment to the payday lender was also dishonoured. The day before the next $48 payment was due the payday lender debited $150 from Awhina’ s bank account, leaving her with $35 for all her weekly expenses.


Inconvenience caused by debit

Awhina was shocked and tried again to call the payday lender, but the telephone lines were overloaded. Awhina was able to share a meal with her cousin, borrow $60 from WINZ, and get a food parcel from the food bank. Just as Awhina was recovering from one very stressful week the payday lender debited a further $150 from her bank account again leaving her without any money for food.

Awhina contacted us for help. We referred the complaint to the payday lender’s internal complaints process


The payday lender’s view

The payday lender:

  • explained that its contract allows it to debit the customer’s account with the amount of the principle borrowed if two successive loan repayments are dishonoured
  • said it tried to contact Awhina by text and email but she did not respond
  • acknowledged that its telephone lines are occasionally overloaded, but said Awhina could have sent an email or message.

 In resolution of the complaint the payday lender offered to write off the residual balance of $33 and refund a $12 overcharge.


Awhina’s view

Awhina did not accept the settlement offered. She felt the payday lender did not appreciate the consequences for her of the unexpected $150 debit to her account. Awhina explained that in the context of her recent marriage breakup the debits caused her to feel anxious and vulnerable.

Awhina also said WINZ and the food bank were reluctant to help because the debt related to a payday lender, making it was difficult to get the loan and food parcel. Although she did not go hungry, it was a very stressful few weeks.

Awhina also said that after we referred the complaint to the payday lender, she continued to receive emails and texts from the payday lender demanding she pay the residual $33 owed.

Awhina complained to FSCL.



This complaint highlighted a couple of issues for us, which we raised with the payday lender.


Responsible lending guidelines breached

We drew the payday lender’s attention to section 9C of the Credit Contracts and Consumer Finance Act 2003 (the Act), reminding the payday lender of its responsible lending obligations. While the payday lender’s contract with Awhina may have allowed it to debit her account with $150, the payday lender knew that Awhina’s weekly income was $185 and that after the $150 debit she would be left with only $35. In our view the payday lender had breached its obligation under section 9C(3)(d)(i) of the Act to treat Awhina reasonably and ethically.


Inadequate internal complaints process

We were concerned that the payday lender continued to text and email Awhina demanding repayment after the complaint reached its internal complaints process, but did not contact her about the complaint for almost two weeks. We would have expected the payday lender to contact Awhina immediately, and put recovery action on hold while it investigated her complaint.


Telephone system inadequate

We noted that Awhina’s stress was exacerbated by her inability to reach the payday lender by telephone. Although there were other ways to communicate with the payday lender, in our experience for some customers telephone is the most immediate, and sometimes the only means of communication, available. We encouraged the payday lender to improve its telephone system as soon as possible.



We asked Awhina how she would like the complaint resolved. Awhina said that in addition to the payday lender’s offer, she would like the payday lender to pay her $300, to recognise the consequences for her of the unexpected debits to her bank account.

We went back to the payday lender and asked whether it would like to increase its settlement offer by $300. The payday lender agreed and the complaint was resolved on that basis.


Key insights for the participant and the complainant

This complaint highlights the usefulness of the responsible lender guidelines under the Act. Although the contract between the lender and the borrower allowed the lender to debit the borrower’s account, the Act allowed us to look at the circumstances of the debit. It is a timely reminder to all lenders to check that debt recovery process is reasonable and ethical. It is also an encouragement for consumers to see consumer protection legislation in a practical context.