Client Advocate Sam Mani says Christians Against Poverty is heartened to see the Commerce Commission take enforcement action against lenders who continue to disregard the law and cause hardship and distress.

“Despite the strengthening of responsible lending laws in 2021, we’ve continued to see around forty lenders disregarding the law to make a quick buck, and as a result tipping vulnerable people into financial hardship and distress.

“In the last two-and-half years we’ve successfully disputed more than 100 unaffordable loans, resulting in $850,000 of debt being written off for clients. However, by this stage the harm to clients is already done, so we hope this enforcement action sends a clear message to these lenders to behave responsibly.

“Common breaches of the law we see are lenders fudging the numbers on affordability assessments by overestimating income and underestimating expenses, and overlooking clear signs of hardship such as defaults on other loans.

“Unfortunately, the vehicle finance industry is the worst we see because of the harm caused. People go without essentials like food and power to prioritise loan payments, so it doesn’t spiral out of control given the penalty interest and default fees, as well as the risk of having their car repossessed or immobilised.

“This is one of many reasons why Christians Against Poverty continues to call for a government inquiry into the vehicle finance sector and for flex commissions, junk insurance add-ons and the punitive use of vehicle immobilisers to be banned.”

Malia’s story (Does not want her full name published)

Malia had $16,000 of debt written off by a car lender after Christians Against Poverty advocated on her behalf to the lender.

The lender had not conducted a proper affordability assessment, failed to obtain all her bank statements and ignored obvious signs of hardship such as missed rent repayments and default payments on another loan.

Despite this, the lender issued her with a $24,000 loan with as 29.95% interest rate, payable at $217 a week.

Malia’s debt soon spiralled out of control and was unable to pay for basics including school lunches and doctor’s visits for her children. Soon her power was disconnected, and she resorted to taking out further loans to cover essentials.

At breaking point, Malia phoned Christians Against Poverty and we helped her put a budget together to prioritise essentials, and negotiated down unfair interest, fees and loans with lenders.

Malia is now able to cover essentials and is on her journey to becoming debt free—one of more than 2000 people Christians Against Poverty had helped to go debt free.

Valetti’s* story (Is not available for interview)

Valetti had $14,000 of debt written off by a car lender after Christians Against Poverty advocated on her behalf to the lender.

The lender had not conducted a proper affordability assessment, under-estimating expenses or failing to account for them completely. At the time of applying for a loan, Valetti had just moved house, but instead of enquiring into the new rental costs, the lender allocated a nominal amount of $50 a week towards ongoing accommodation costs.

Finally, the lender did not budget for the ongoing running costs of the vehicle, including petrol, WOF, registration and insurance.

Despite evidence suggesting any loan would be unaffordable, the lender issued her with a $17,000 loan with a 24.95% interest rate, requiring weekly repayments of $143.

Valetti’s debt soon spiralled out of control and was unable to pay for essentials like rent. Valetti's car was immobilised after she missed payments, causing her distress when she was unable to pick up her children from kindergarten.

At breaking point, Valetti phoned Christians Against Poverty and we helped her put a budget together to prioritise essentials and raised a complaint with the lender on the basis that the loan was unaffordable and in breach of the responsible lending requirements.

After the lender refused to remedy the hardship, CAP escalated the matter to the lender's dispute resolution service, who ruled that the lender did not meet their responsible lending obligations. The lender was told to refund all interest and fees, set up an affordable repayment rate, and provide compensation for the times when the car was immobilised.

*Name changed to protect identity

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