Debt management company makes debt even worse

In October 2020, Kauri signed up with a debt management company. The plan was that Kauri would make fortnightly payments to the company, who would liaise with his creditors to make repayments on his behalf. The company was run by Sally, a financial adviser.

After 6 weeks, Kauri noticed only two payments had been made to creditors of $50 each. By this time, Kauri had paid the company a total of $1,800 to pass on to his creditors. Kauri tried to contact Sally about the repayments, but she would not respond.

Kauri’s creditors started chasing him for payments and threatening to charge fees and interests or pass the accounts on to debt collectors. Kauri still couldn’t get in touch with Sally, and came to FSCL for help.

 

Dispute

Kauri couldn’t understand why Sally hadn’t paid his creditors as per their agreement. Kauri wanted a refund of his money urgently so he could pay his creditors himself and move forward with his own repayment plans.

 

Review

We managed to get in touch with Sally, who said the company was in financial strife, but promised to pay Kauri back in full.

After a week or so, Sally still hadn’t repaid Kauri any of his money. Sally then promised to pay Kauri back in four weekly instalments instead, starting with a $400 payment she had made to Kauri that day. Kauri wasn’t happy with this outcome, because he desperately needed all his money back to start paying his creditors again. We talked to Sally about repaying Kauri in one lump sum, which she said was impossible.

We considered Sally should pay Kauri some compensation for the considerable stress and inconvenience she had caused Kauri by not paying his creditors and by refunding him in instalments instead of a lump sum. To this end, we thought an additional $1,000 of compensation would be fair.

After some discussions with Sally about what payments she could make work, Sally eventually agreed to pay Kauri a total of $2,400 in 6 fortnightly instalments of $400.

 

Resolution

Although Kauri would rather be refunded in a lump sum, he was pleased to be paid $1,000 of compensation in addition to his refund, and agreed to the proposed resolution.

 

Insight for participants

Avoiding or ignoring a complainant never helps in finding a resolution, and makes it more likely a complaint will be escalated to FSCL.

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