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What is in a waiver?

A case, investigated by Financial Services Complaints Limited (FSCL) in 2021, highlights why it is important for consumers to make sure that they understand the terms of repayment waivers when taking out a loan.

The complaint, made to FSCL, a free service which investigates complaints against financial services providers, saw a consumer left with debt they weren’t expecting after they lost their job, believing the repayment waiver they opted for when they took out a loan to buy a car would cover their loan repayments. 

“Consumers need to ask themselves if the add-ons they are looking to purchase are fit for purpose and need to make sure that they understand what the product covers. A consumer is well within their right to seek advice. They can speak to friends, family, or a financial adviser to make sure that they understand what they are agreeing to,” explains FSCL CEO, Susan Taylor.

In the recently published case note, Sione and his partner had two loans, secured by vehicles, one was to consolidate debt, the other was used to buy a car. For both loans, the couple purchased an optional repayment waiver.

It was only when Sione ran into difficulties with his job and needed to apply for hardship assistance and wanted to claim under the repayment waivers that he realised that the waivers only covered one borrower.

In this case, Sione’s partner was covered, and the waiver could only be used in certain circumstances, for example, if Sione’s partner was unable to work due to illness. 

Unfortunately, the situation worsened when Sione resigned from his job after an unsuccessful employment mediation and one of their vehicles was written off.

Sione complained to the lender that the repayment waivers hadn’t been applied to his job loss and that the lender had used the insurance payment to repay the loan which was secured by the written- off vehicle. After meeting with the lender and not being able to reach a resolution, Sione complained to FSCL.

Sione believed that the repayment waivers should have applied to his job loss, and that they should have covered him because he earned more than his partner. He also argued that the waivers weren’t suitable, and that the lender hadn’t explained them properly.

Sione also said the lender refused hardship assistance and the lender was not entitled to the insurance pay-out when his car was written off.

The lender was happy to discuss a payment plan for the outstanding debt, but needed to look at Sione’s bank statements. The lender said that if an affordable repayment plan could be reached, they would reverse the default interest that had been charged on the loan.

FSCL found the lender was not at fault and suggested Sione agree to a repayment arrangement.

“Unfortunately, in this case, even if the waivers had covered Sione, they would not have been applicable to his job loss anyway, as the waivers did not cover job resignations,” says Ms Taylor, “This case highlights the importance of consumers understanding the terms and conditions of any agreements, including insurance cover, when making a large purchase.”