Watchdog warns 'irresponsible' lender over car loan and repossession

Tuesday, 10 December 2019

WeCare Finace has been warned by the Commerce Commission over irresponsible lending.

A finance company has been warned by the Commerce Commission over an 'irresponsible' car loan that nearly doubled to more than $10,000.

WeCare Finance failed to make reasonable inquires before providing the loan which was originally for $5500, the consumer watchdog said.

The Hamilton lender did not ensure the client would be able to make the repayments without suffering 'substantial hardship', and failed to treat the borrower in an ethical manner when it repossessed her vehicle, the commission said.

WeCare Finance failed to exercise the care, diligence and skill of a responsible lender, it said.

The loan, which was made in October 2017 resulted in the borrower having to repay $10,500 over three years, including fees, interest and insurance.

* Former lawyer tipped to be new head of competition watchdog

* Finance companies fined $103,500 for using fridges, beds as security in loan contracts**

Commerce Commission warns retailers about over pricing (video first published in October 2019).

The commission began investigating WeCare Finance in August last year after a complaint from a financial mentor.

The borrower said she and her partner had told WeCare Finance that they had a combined income of $600 a week, and expenses of $150. However, a bank statement provided at the time showed expenses were about the same as the couple's joint income.

Commission chairwoman Anna Rawlings said it was important to bring the case to the attention of other lenders because WeCare Finance had not met the Lender Responsibility Principles.

'It did not make reasonable inquiries about the borrower's ability to afford the loan. It took into account her income and her then-partner's income but he was not a party to the loan and in our view, WeCare should not have taken his income into account,' Rawlings said.

'WeCare also failed to make reasonable inquiries into the borrower's expenses given that information contained in the bank statements was not consistent with the information provided by the borrower,' she said.

The Commerce Commission opened the investigation into WeCare Finance in August 2018 following a complaint.

The borrower failed to make two payments in early 2018. She then reduced the payments but missed a further repayment.

The borrower then entered into a no asset procedure (NAP), which clears a debtor's debts when there was no way of paying them.

An NAP has an impact on an individual's credit rating and could affect their employment. It is administered by the Insolvency and Trustee Service and is not as restrictive as bankruptcy.

The same day WeCare Finance was advised of the NAP, it repossessed the car without notifying the borrower on the basis that the car was 'at risk'.

However, Rawlings said the finance company had no grounds for the repossession and that the car was not 'at risk' simply because the borrower had entered the NAP.

'The vehicle was not about to be destroyed, damaged or disposed of. In our view WeCare did not treat the borrower reasonably or ethically when it arrived at her home, without prior notice, and repossessed her vehicle without the right to do so,' she said.

The commission was told that a WeCare Finance staff member had acted outside of its guidelines when the car was repossessed. WeCare Finance had revised its consumer lending and repossession policies.

The company had addressed the complaint directly with the borrower, Rawlings said.