Jude was a regular customer of a mobile trader (truck shop). Jude was walking home one day when, having recognised Jude, one of the mobile trader’s trucks pulled up alongside him.
Jude bought $500 worth of items from the truck which were added to his account, bringing his balance up to about $2,000.
Jude was struggling with his finances and went to see a financial mentor for assistance. The financial mentor noticed Jude’s recent purchase from the mobile trader and complained to FSCL on Jude’s behalf about the mobile trader.
Dispute
The financial mentor said Jude had a mental health diagnosis which made it hard for him to ‘say no’. The financial mentor said it was unethical for the mobile trader to approach Jude and pressure him to make a purchase.
The financial mentor said while Jude could afford the weekly repayments of $20-$25, it would take Jude years to pay off his account due to the high interest rate, putting Jude under financial strain.
The mobile trader said they were unaware of Jude’s mental health diagnosis at the time of Jude’s latest purchase. The mobile trader denied pressuring Jude into making a purchase and said Jude appeared engaged with the purchase at the time.
Review
The mobile trader provided a recording of a telephone conversation between Jude and the mobile trader’s customer contact team on the day of purchase. In that conversation, Jude and the mobile trader discussed increasing his weekly payments by $5 to help pay for the additional items.
Under responsible lending laws, lenders have increased obligations where a borrower meets the definition of ‘vulnerable’. A ‘vulnerable borrower’ is someone who the lender knows, or ought to know, is unlikely to comprehend the nature of the transaction.
Going by Jude’s conversation with the mobile trader at the time of purchase, Jude appeared to understand the nature of the transaction and that it would take him longer to repay his account. Jude had even enquired with the mobile trader about other items he wanted to purchase.
We also thought Jude would have understood the transaction since he was a regular customer of the mobile trader.
Resolution
We explained to the financial mentor that we didn’t see any problems with the transaction because Jude didn’t meet the definition of a ‘vulnerable borrower’ in this particular transaction and affordability was not an issue.
We explained to the financial mentor that, because FSCL is not a regulator, we could not investigate or make decisions about the ethics or manner of mobile trading.
We also acknowledged to the financial mentor that while it can take a long time for borrowers to repay high interest loans, again, without being a regulator, we could not investigate the structure of high interest lending. In lending complaints, our role is determine whether a lender has complied with their responsible lending obligations and satisfied itself that the lending and repayments are affordable for a borrower, which we thought the mobile trader had in this case.
The financial mentor accepted our views and agreed to discontinue the complaint. Fortunately for Jude, the financial mentor found an organisation to refinance Jude’s debt with the mobile trader with an interest free loan.
The mobile trader agreed not to approach Jude for future sales.
Insights for consumers
FSCL’s role is to resolve complaints between consumers and financial service providers, usually by requiring the financial service provider to pay compensation to a consumer where their conduct has caused the consumer loss or stress/inconvenience.
We do not regulate or discipline financial service providers.
