Mai borrowed $520 from a lender. The loan was to be repaid in 6 weekly repayments of $123, which included the interest payable on the loan.
Mai made four repayments before she lost her job and fell into financial hardship.
There were only two weeks remaining on Mai’s loan, and in that time Mai struggled to put her hardship application together while also looking for a new job.
Mai managed to make two further payments of $100 and $25 over the next few weeks, but the default fees and interest continued to build up over the following months, and the debt ballooned to $880.
Mai couldn’t understand how her debt had increased so much, and she struggled with the lender’s persistent contact. The relationship between Mai and the lender broke down, and Mai complained to FSCL about the loan.
Mai said the lender knew she had been trying to organise her hardship documents and find a new job, and it was unfair for them to keep charging default fees and interest. Mai thought the loan balance was so high that her statement must be missing some of the repayments she made.
The lender offered to reduce Mai’s loan balance to $350 in settlement of her complaint. Mai didn’t want to accept this offer, because she had already made around $600 in repayments, and she felt the lender had treated her unfairly.
We reviewed Mai’s loan statement and found the balance was correct – there were no missing repayments.
The correspondence between Mai and the lender showed the lender had tried to engage with Mai repeatedly to try and get her to submit a hardship application. The lender was entitled to request written documentation from Mai to support her hardship application, and didn’t have to freeze her account unless they were satisfied Mai was taking steps to prepare a repayment plan and provide the requested documentation.
However, we thought the lender could have been fairer to Mai when she first lost her job. The lender only froze Mai’s account for 3 days over a weekend even though they knew she was trying to arrange the documents they had requested, which required her to arrange a meeting with her former boss. Although Mai had stopped engaging with the lender when the debt started to spiral, the situation could have been avoided if the lender had been fairer from the outset. Furthermore, the lender’s persistent contact with Mai, with daily texts, calls and emails caused her some stress and discouraged her from engaging with them.
We suggested that the lender reduce Mai’s loan balance to $197 in settlement of her complaint. This would put Mai back in the position she was in when she had made 4 of the repayments, less the additional $125 in repayments she had made after she lost her job. This amount also took into account some default interest and fees that had been added to the loan for earlier repayments that came in late, before Mai lost her job.
Mai and the lender agreed to our suggested resolution, and we closed the complaint.
Insights for participants
It’s helpful for lenders to look at hardship situations practically, with a view to getting the matter resolved early on. This can avoid a dispute arising later down the track.