Buyer's remorse

Jasper’s business was expanding and he needed to employ a new staff member. He knew Frederick socially, and had an informal chat about Frederick joining the team. Frederick was currently working for a car yard, and as the new job would involve a lot of driving, they discussed Frederick’s need for a company car. Jasper was very clear that he had not, at this point, approved the purchase.

When Frederick spotted the perfect car at the car yard, he applied for a loan from a finance company in Jasper’s business’s name. Because Jasper had a perfect record with the finance company, the loan was immediately approved. Jasper was invited down to the car yard to complete the purchase.

Jasper signed the loan documentation as the company director and personal guarantor and drove away in the car.

A couple of weeks later it became obvious that Jasper and Frederick were never going to get along, so Frederick returned the car to Jasper and went back to his job at the car yard.

Jasper contacted the car yard and then the finance company saying that he no longer wanted the car, and would like to return it and end the loan agreement. The car yard was happy to take the car back for $1,000 less than Jasper had paid for it. Jasper did not agree complained to FSCL that the finance company had accepted a fraudulent loan application.

 

Dispute

Jasper said Frederick had fraudulently completed the loan application, had not gathered any information directly from him and instead had plucked numbers out of thin air, including listing the annual company profit of $10.

The car yard spoke to Frederick who said the information came from Jasper.

The finance company said it was satisfied with the loan application process and that, if Jasper did not want to buy the car, he should not have signed the loan agreement and driven away with the car. The finance company suggested Jasper return the car for resale through the car yard and said it was open to negotiating a repayment plan for any shortfall.

 

Review

We explained to Jasper that this was a business loan, so the lending process was different from the process we might expect to see if he had borrowed money in his personal capacity. Because Jasper already had a lending history with the finance company, it based its decision to lend on what it already knew about Jasper. While the loan application lacked detail, we could not see any evidence of fraud.

We suggested to Jasper that the time to challenge the legitimacy of the loan agreement was the day he signed it, not some months later.

There was insufficient evidence to allow us to set the loan agreement aside. There was no doubt Jasper had signed the loan agreement, accepted the finance, and agreed to repay the debt. We suggested that Jasper sell the car as soon as possible and if, after the sale, there was a shortfall he should discuss a repayment plan with the finance company.

 

Resolution

Jasper was disappointed with our view but agreed to discontinue his complaint.

 

Insights for consumers

When you sign a loan agreement, you are agreeing to the terms of that agreement. You cannot change your mind later and reverse that transaction, unless you do within any cooling off period allowed under the loan.

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