Borrowers urged to know what they’re signing

Borrowers urged to know what they’re signing as loans and travel insurance top complaints

New Zealanders are being reminded to make sure they know what they’re getting into before signing loan agreements, insurance policies and other financial contracts.

The reminder comes as dispute resolution scheme Financial Service Complaints Limited’s (FSCL’s) annual results show consumer credit and travel insurance remain the top two areas of complaint, accounting for over half the cases investigated by FSCL in the last year.

FSCL received over 2,600 enquiries and complaints over the last year, down 17% on the previous year. Despite this, the number of cases FSCL received for investigation remained static – 198 compared with 201 in 2013/14.

Chief Executive Officer Susan Taylor said she expected to see a rise in consumer credit cases in the coming year as the recent changes to credit laws “bedded in”.

“The new consumer credit laws and Responsible Lending Code are welcome additions to the financial services landscape and will help us right some unfair practices in the industry.

“But we are still seeing too many complaints where consumers haven’t understood the loan contract they’ve signed or the fees they’ve been charged, or weren’t aware of the limits to insurance cover.”

Ms Taylor said that while she urged borrowers to seek advice before signing a loan agreement and to ensure they could afford to meet the repayments, the onus was on lenders to understand and meet their obligations under the law.

One recent example saw a couple facing a potential mortgagee sale of their home after facing a demand for payment of over $115,000, which was later reduced to $53,000.The loan company had incorrectly charged default interest on the entire loan amount for more than four years without telling the couple, after the couple missed their first repayment at the start of the loan.

“We found that the lender had acted oppressively in trying to take the action it did and the couple only owed around $8,000. In the end the couple were able to clear their debt and received compensation for the stress and inconvenience caused” said Ms Taylor.

“Borrowers need to know that if they have a problem with their loan, and feel the lender has treated them badly, there is an independent dispute resolution scheme they can go to for help at no cost.”

FSCL will release its full annual report for the 2014/15 financial year in October.

ENDS

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