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In 2021, Isabella was struggling to make her loan repayments, and her account fell into arrears. Isabella told the lender that she was able to make a payment of $600 towards the arrears, and that she planned to sell her car to pay the remaining amount she owed. The lender told Isabella to hold on to the $600 and use it to make the full payment once she had sold her car. However, Isabella’s car did not sell, and no payment was made.

The lender wrote off Isabella’s debt and sold it to a debt collection agency. Isabella complained to the lender. She said that if she had made the payment of $600, as she had planned, then her debt would not have been sold. Isabella complained that the lender told her not to make this payment, so they should not have sold the debt.

The lender purchased Isabella’s debt back from the debt collection agency and agreed to a new payment plan with Isabella. However, Isabella was not happy with the amount of fees that the debt collection agency had charged, so she asked the lender to revert the loan balance back to what it was before the debt was sold. Isabella also asked the lender to provide new loan documents and confirm that her payments were being allocated to her account, as she noticed that her loan balance was not decreasing.

The lender did not revert the loan balance back to what it was before selling the debt, or respond to Isabella’s other queries, so Isabella contacted a financial mentor. Isabella’s financial mentor told her that the loan account was showing as closed on her credit record. Isabella stopped making her payments.

The lender sold Isabella’s debt to a debt collection agency again in 2023, as Isabella had not made any payments. Isabella complained that the debt should not have been sold and asked the lender to purchase the debt back. The lender declined, so Isabella complained to FSCL.

Dispute

Isabella explained that she stopped making payments because the lender did not respond to any of her queries, and her credit record showed that the loan account had been closed. Isabella said that she wanted the lender to purchase the debt back from the debt collection agency, as she wanted the lender to take responsibility for any mistakes they had made. Isabella said that she did not want FSCL to investigate the debt collection agency, as she did not think they had done anything wrong.

Review

We explained that although the debt was originally with the lender, it had now been sold to a debt collection agency. This meant that the debt collection agency became responsible for any complaints about the way the lender handled the debt. We explained that if we investigated Isabella’s complaint about the lender, and we found that the debt should be reduced or waived, the lender would be unable to action these changes. This is because they no longer owned the debt.

We told Isabella that we could not ask the lender to purchase the debt back, so if she wanted us to investigate the issues she raised, she would need to continue with a complaint about the debt collection agency. Isabella agreed to continue with a complaint about the debt collection agency, and said that she would pursue her complaint about the lender elsewhere.

Resolution

After we started our investigation, the debt collection agency made an offer to waive $33,708 in interest and fees, leaving Isabella with $21,752 left to pay. Isabella accepted their offer.

Insights for consumers

When a debt collection agency purchases debt from a lender, they become responsible for any issues relating to that debt. This includes any issues that occurred before the debt was sold.