In October 2021, Sokha took out a $28,990 loan at a 16.95% per annum interest rate to purchase a vehicle. Her weekly repayments were $190 for 5 years. She would pay $48,000 in total by the end of the loan (including $15,000 in interest).
Sokha made all her repayments. By October 2023 she had paid about $20,000 towards her loan, and she couldn’t understand why she still owed $20,000 two years after taking it out. Sokha complained to FSCL.
Dispute
Sokha said she didn’t understand how her loan balance was still so high. She said the car was only worth about $28,000, so she should only have $8,000 left to pay, not the $20,000 the lender said she still owed. Sokha said that the lender had only pointed out the weekly repayment amount before she signed the loan contract, not the total amount she would pay, including fees and interest. Sokha also said that she shouldn’t have to pay for the device that the lender installed into her vehicle because it was for the lender’s benefit, not hers.
The lender said that the loan agreement was properly explained to Sokha and that she understood it when she signed it. They said that Sokha agreed to pay the device fee as part of her loan contract.
Review
We reviewed the loan contract, which showed that some parts, like the weekly repayments, were circled in pen, but other parts, like the total interest owed for the life of the loan, weren’t. We could also see that Sokha had initialled several sections in the agreement to confirm that she had read and understood them. We discussed this with Sokha, and she agreed that it probably would have seemed to the lender like she understood the amount of interest that she would pay over the life of the loan. As such, she would not question this further.
The lender offered to remove the device from the vehicle and not charge Sokha any further fees for it over the life of the loan, which Sokha accepted.
Sokha explained that she was struggling to make repayments, and the lender agreed to discuss hardship options with her.
Resolution
Sokha was happy with the solutions the lender offered her and she discontinued her complaint.
Insights for consumers and participants
Consumers should take their time when reading a loan contract to make sure that they fully understand what they are agreeing to. Asking questions or bringing a support person who can help explain things can also be useful.
Lenders should ensure that all key parts in a loan agreement are pointed out to the consumer before they sign.
