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Sharp rise in complaints about lenders and finance companies

Media release

FSCL sees sharp rise in complaints about lenders and finance companies

Complaints against lenders and finance companies are on the rise says one of the financial services industry’s largest dispute resolution schemes, with car loans causing particular angst for consumers.

Susan Taylor, Chief Executive Officer of FSCL, says that in the year to end June, complaints against lenders and finance companies rose sharply, more than doubling in number from the previous year (from 17 to 39 complaints) and making up more than a quarter of all cases FSCL investigated.

The nancial product most complained about was consumer credit arrangements, accounting for 35 of the 149 complaints investigated in the last year. Most involved personal loans to consumers for motor vehicle purchases.

Ms Taylor says complainants typically alleged unlawful repossession, or unfair or oppressive conduct by the lender. She says it was the behaviour of the minority that let the industry down.

“Most lenders have very good processes and only take recovery action as an absolute last resort. Unfortunately there are a few whose actions are unlawful, unfair or oppressive and they tend to give the industry a bad name.”

Ms Taylor says that she was hopeful that the increase in complaints reflected a growing consumer awareness of the availability of dispute resolution services rather than a rise in issues as such.

“That said, FSCL welcomes the changes proposed under the Credit Contracts and Consumer Finance Reform Bill to strengthen protections for consumers.”

Many of the cases FSCL investigated highlighted poor levels of nancial literacy, particularly among those more vulnerable complainants such as low income earners, beneciaries and people who speak English as a second language.

“Problems are often caused by loan contracts that are long and written in very small print. They can include complex legal clauses that are very difcult for consumers to read, let alone understand.”

FSCL has some tips for consumers taking out personal or other loans:

• read the loan contract carefully before signing it

• take time to understand the contract before signing it – there is no need to ‘sign on the spot’

• ask the lender questions if you do not understand a particular clause or clauses

• make sure you know the rate of default interest and charges you will have to pay if you can’t meet loan payments

• make sure you understand what recovery action the lender may take if you default on loan payments

• if possible, obtain legal or professional advice, perhaps through a community law centre, before signing the loan contract

• if your circumstances change, let your lender know as soon as possible as it may be possible to negotiate new or temporary loan repayment arrangements.

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