A lender has wiped out a loan that a woman, who was being abused by her partner, could not afford. Huan, who was forced to borrow the money, had been coerced into taking on the debt, because her partner had a bad credit history.
“Although the lender had not done anything wrong, they could see that the right thing to do was to release Huan from the debt,” explains Financial Services Complaints Limited (FSCL) CEO Susan Taylor, “We were pleased to see a lender taking a compassionate and pragmatic approach to this situation.”
FSCL is a free service for consumers and can investigate complaints about a range of financial service providers.
Huan completed a loan application for a car, after her partner pressured her to do so. Her bank statements showed regular benefit income but did not show any of the usual living costs.
When the lender’s agent, the car dealer, asked Huan why she did not appear to be paying rent, power, or any of the usual day to day living costs Huan explained that she was living with her parents, so did not have any of these costs.
With this information, the lender calculated that Huan could easily afford to repay the loan. The loan was approved and Huan made all the loan repayments for six months without any difficulty.
When the loan payments suddenly stopped, Huan explained she had recently fled an abusive relationship and could no longer afford to repay the loan.
Huan said that she had not been able to take the car with her, so had transferred the ownership into her partner’s name because she was worried that he might incur traffic fines that she would be responsible for. To complicate matters further, Huan was now pregnant and in hiding, fearful that her former partner might find her.
The lender planned to repossess and sell the car, but when they were unable to locate the car, they told Huan she would be liable for the full amount of the debt: $12,000.
Huan was distraught. She had no ability to repay the debt and asked her mother for help. Huan’s mother complained to FSCL saying she could not understand how the loan could have been affordable in the first place.
FSCL was satisfied the lender had met their responsible lending obligations. The lender could not have known that Huan was being manipulated by her abusive partner to borrow money. While Huan was living with her partner the loan was easily affordable. The difficulty came when Huan was finally able to leave the abusive relationship.
“The lender explained that, on the information available to them when Huan applied for the loan, the loan was affordable and that they could not have known about her personal circumstances. The lender was satisfied that they had met their responsible lending obligations, and they offered Huan a repayment plan,” explains Ms Taylor.
“Huan’s mother said her daughter had no income available to repay the lender. Huan had been left with considerable debt and was focused on rebuilding her life.”
FSCL asked the lender whether they would release Huan from her obligation on compassionate grounds. After a financial mentor put together Huan’s statement of financial position showing she had no money available to pay the debt, the lender agreed not to pursue Huan for the debt.
You can read the full case note here.