Lender miscalculates ability to service loan...

The Insurance and Financial Services Ombudsman has upheld a complaint by a borrower that the lender failed to correctly assess their ability to service their car loan.

The lender accepted a claim by the borrower that their overtime (33 hours per fortnight) was regular, without any proof. They also miscalculated the borrower’s expenses by failing to include insurance for the vehicle.

IFSO held these errors to be breaches of the Credit Contracts and Consumer Finance Act and the lender was required to refund all interest and fees and stop claiming further interest.  This meant the borrower’s loan was paid in full, plus he received a refund of overpayments made.

The lender’s failure to make reasonable inquiries about the borrower’s ability to repay the loan without suffering substantial hardship was a costly error.

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