Ann,* who was supporting a high-needs child on a benefit, arranged 4 loans over 2 years with the same finance company (lender). Ann later told her lender she couldn’t make the repayments - her house had been demolished and she was homeless. Over the next year, the lender rearranged Ann’s loans: increasing, then reducing, then extending her repayments. Ann was charged multiple fees. Eventually, the lender issued a repossession notice.
A community lawyer complained on Ann’s behalf about irresponsible lending and unreasonable fees. He said the lender knew about Ann’s circumstances, and it was clear Ann couldn’t afford to repay the loans, which would create substantial hardship.
Under the Credit Contracts and Consumer Finance Act 2003 (CCCFA), lenders must make reasonable inquiries to be satisfied the loan is suitable, and repayments can be made without causing substantial hardship.
The CCCFA also states fees must be reasonable. The lender said it made reasonable inquiries for each loan, and its fees were reasonable. However, it did not provide any evidence about its process, or fees.
The case manager acknowledged the lender made adjustments to allow Ann to repay a small amount per week, without interest, until the debt was repaid. But the lender was not able to prove it lent responsibly to Ann, who was a vulnerable borrower.
The lender accepted its communication could have been better and agreed to refund Ann’s payments (since the complaint) and write off Ann’s debt.
*Names have been changed