Lending based on uncertain overtime and incorrect expenses
In a recent case investigated by the IFSO Scheme, a financial mentor was able to help Jake get all the interest and fees on his loan refunded.
In a recent case investigated by the IFSO Scheme, a financial mentor was able to help Jake get all the interest and fees on his loan refunded.
A few years after taking out a loan to buy a car, Jake* found himself in financial difficulty, so asked a financial mentor for help.
The financial mentor made a complaint on his behalf to the IFSO Scheme, saying the loan was not affordable and in breach of the Credit Contracts and Consumer Finance Act 2003 (CCCFA).
The IFSO Scheme looked at the affordability calculation used for the loan and found it had been based on Jake working significant overtime of 33 hours in a fortnight. Although the lender claimed Jake had said his overtime was regular and consistent, there were no written records and nothing to prove the lender had made “reasonable inquiries” to confirm this.
In addition, the lender had made a mistake in its calculation of one of Jake’s expenses. There was also a regular payment for vehicle insurance which was not included.
The IFSO Scheme believed there had been a breach of the CCCFA, because the lender had not made sufficient inquiries about whether Jake would be able to meet his payments without suffering substantial hardship.
Applying the remedies set out in the CCCFA, the IFSO Scheme asked the lender to refund all interest and fees paid on the loan, with no further interest payable.
This meant that Jake could have his loan wiped, security lifted and a cash refund of some of the interest.
Complaint upheld
Lenders are required by law to make reasonable inquiries about whether borrowers will be able to meet their payments without suffering substantial hardship.
*Name has been changed