Financial mentor helps client get loan sorted
In a recent case investigated by the IFSO Scheme, a financial mentor was able to help their client get a loan sorted and get a refund of interest and fees.
In a recent case investigated by the IFSO Scheme, a financial mentor was able to help their client get a loan sorted and get a refund of interest and fees.
Media release 14 August 2023
This Money Month, Karen Stevens, Insurance & Financial Services Ombudsman (IFSO), is recommending that people who are struggling to repay debt “pause, and get sorted” by contacting a free financial mentoring service.
“Not only can financial mentors help someone with budgeting advice, but they can also help consumers make a complaint if they are concerned about a lender not lending responsibly,” she says.
The Insurance & Financial Services Ombudsman Scheme (IFSO Scheme) helps resolve complaints about insurance and financial services, and its service is free for consumers. It is one of four dispute resolution schemes of this type in Aotearoa, the others being Financial Services Complaints Limited (FSCL), the Banking Ombudsman Scheme, and Financial Dispute Resolution Service (FDRS).
In a recent case investigated by the IFSO Scheme, a financial mentor was able to help their client get a loan sorted and get a refund of interest and fees.
A few years after taking out a loan to buy a car, Jake* had found himself in financial difficulty, so asked a financial mentor for help.
The financial mentor helped Jake make a complaint to the IFSO Scheme, saying his loan was not affordable and in breach of the Credit Contracts and Consumer Finance Act 2003 (CCCFA).
“Lenders are required by law to check whether borrowers will be able to meet their payments without suffering substantial hardship,” says Stevens.
“They need to do this by getting reliable information and making sufficient inquiries about a person’s income and expenses,” she says.
In Jake’s case, the affordability calculation used for his loan was based on him working significant overtime of 33 hours in a fortnight. However, there were no written records confirming the overtime, and nothing to prove the lender had made “reasonable inquiries” to check the overtime was reliable.
The IFSO Scheme believed the affordability calculation should have been based on a lower monthly income, to factor in any possible changes in Jake’s overtime hours.
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 had been left out.
The IFSO Scheme agreed with the financial mentor that there had been a breach of the CCCFA, and asked the lender to refund all interest and fees paid on the loan, with no further interest payable. This was a really great result for Jake.
Usually, the way the IFSO Scheme can assist financial mentors and their clients is by applying the remedies set out in the CCCFA.
Stevens says that sometimes, consumers want a lot more than their entitlement under the law.
“They think they should get a refund of interest and fees and the loan wiped and be able to keep the vehicle. However, that is not possible in the majority of cases we see. We can only apply the remedies under the CCCFA. Those remedies are limited to a refund of fees and interest”.
Financial mentors can really help their clients when they understand how the CCCFA works and what remedies are available.
Stevens says, “there’s nothing worse than someone being under financial pressure and getting the wrong information, so they get their hopes up. It’s great when financial mentors can guide them through and explain about CCCFA remedies right from the beginning; it stops misunderstandings and disappointment later on”.
“Jake did the best thing possible by contacting a financial mentor to help. He was supported to make a complaint about his lender and got a positive outcome,” says Stevens.
“Money Month this year is all about pausing to take a moment to find opportunities and get sorted. If people are struggling with debt, we recommend they get in touch with a financial mentor – they can be really supportive, and they can also easily access the approved dispute resolution schemes to help if needed” she says.
People can find a financial mentor near them through Money Talks or they can contact 0800 345 123.
If people have a problem with a lender they can make a complaint to the IFSO Scheme at www.ifso.nz or by calling 0800 888 202.
Media contact
Sarah Smythe
IFSO Scheme Communications Manager
sarah@ifso.nz
021 292 4036