Getting help with debt - case study
This information relates to laws in Victoria, Australia.
Dave was working full-time but often struggled to make ends meet. He already had a $3000 loan with a credit company when he asked them for another $2000 loan.
The salesperson at the credit company offered to refinance his existing $3000 loan and bundle this in with the new loan. Dave accepted this, and then returned to the credit company three more times to take out new loans. Each time the existing loan was refinanced under the new loan.
In one month the credit company had extended Dave’s credit by over $10,000, but the refinancing of the loans increased his total liability to around $40,000.
The monthly repayments ended up being a large proportion of Dave’s income. When he lost his job, he was unable to make his loan repayments at all.
Dave was under a lot of financial strain. With the credit company threatening legal action, he approached a community legal centre for help. He was advised that the credit company had breached its responsible lending obligations under the Code of Banking Practice by failing to properly assess his ability to repay the loans.
The community legal centre helped Dave lodge a complaint with the Financial Ombudsman Service about the credit company’s actions and requested financial hardship assistance for Dave.
The Financial Ombudsman Service found that the credit company had failed its obligations. They renegotiated the terms of the loan agreement on Dave’s behalf so that a significant amount of the refinancing debt was reduced. Dave was also given extra time to make his repayments.
This was big relief for Dave who could start to get his finances back on track.