Rob’s life was turned upside down when his only child, Phoebe, was diagnosed with a rare illness. Rob quit his job and devoted himself to caring for Phoebe and finding a cure. Rob could no longer afford to repay the money he had borrowed to buy a car.
When the payments stopped the lender contacted Rob and asked him what was going on. Rob explained and the lender asked Rob to complete a financial hardship application.
Over the subsequent months Rob did his best to make the loan repayments and was in frequent contact with the lender. While the lender allowed some flexibility, without a formal hardship application it was unable to assess what relief it could put in place for Rob. Rob said he would sell the car, but arranging the sale was more than he could manage. Rob eventually surrendered the car to the lender.
The lender was closely related to a car yard so, after tidying up the car and undertaking minor repairs, it put the car up for sale. Eventually, after nine months and two reductions in price, the car sold for $10,000, leaving Rob with a residual debt of $7,000. Rob had paid $12,000 when he bought the car three years earlier.
Dispute
Rob said the lender had taken an unreasonably long time to sell the car. Given his personal circumstances, particularly Phoebe’s ill health, Rob wanted the lender to reduce, and hopefully write-off, the debt owed.
The lender declined, saying it had responded reasonably to Rob throughout. It was prepared to consider a hardship application, had allowed Rob to reduce payments to $10 a week at times, but Rob had often failed to adhere to agreements.
The lender could not understand why the car had taken so long to sell but said this had no real impact on Rob. No further interest or fees were added to his debt after the lender had taken possession. The lender said it could have sent the car to an auction house but considered it had achieved a better price by selling the car through a yard.
Rob complained to FSCL.
Review
From time to time personal circumstances change; and, even with the best of intentions, it is impossible to repay debt. We could see that Rob’s family had been through an extremely difficult time and could understand that repaying the loan was a low priority when dealing with such a life changing event.
However, we could also see that the lender had been considerate and compassionate. It had tried to help Rob, by offering to consider restructuring the loan through its hardship process. The lender had also reduced payments, changed payment days and the frequency of payments to accommodate Rob’s circumstances.
Rob’s decision to surrender the car was the only viable option. Although the lender could have sold the car quickly by auction, its decision to sell through the car yard was reasonable and the lender obtained a reasonable price for the car. Given that Rob was no longer paying interest or storage costs, the delayed sale did not disadvantage Rob. Rather, it seemed to us that the lender was trying to increase the sale price of the car to reduce the residual debt that Rob would owe.
In our view the lender was not obliged to reduce Rob’s debt and we encouraged him to talk to the lender about repaying the residual debt at an affordable rate.
