An Uninsured Driver And A Debt Written Off

A recent case, investigated by dispute resolution scheme, Financial Services Complaints Limited (FSCL) saw a lender go above and beyond to write off a debt following a tragic change in the borrower’s circumstances.

A young person who took out an $11,000 loan for his first car was left without a car and a lot of debt following an accident which resulted in the death of a friend.

Wiremu, 19, let a friend drive his car and was following behind in another vehicle when the accident happened. Unfortunately, Wiremu’s car was written off and as his friend was not named as a driver on his policy, Wiremu’s insurance claim was declined.

Following the accident, Wiremu fell behind on his loan, the lender approved a hardship application and put his account on hold for three months. They also wrote off the loan arrears and the default fees he had paid.

Wiremu experienced trauma because of the accident (he was a first responder on the scene), the death of his friend, and his financial situation. This included panic attacks, anxiety, and depression.

Left with debt of $9,300, no car and no insurance pay-out, a family member questioned if the loan had, in fact, been affordable for the young person to begin with.

The lender did not accept that the initial loan was unaffordable, but nevertheless offered to reduce the debt to $8,000 and to stop charging interest and fees.

Following the offer, George, an uncle who was helping Wiremu, brought his complaint to FSCL on Wiremu’s behalf.

In addition to disputing the original loan’s affordability, George argued that the lender should have known that Wiremu did not have “true” full comprehensive motor vehicle cover because only Wiremu and named drivers were covered.

However, the lender said they only require full comprehensive cover for the owner to drive the vehicle, which in this case, Wiremu did have.

Despite the fact the car was not insured for an unnamed driver and their view the loan had been affordable when Wiremu took out the loan, the lender considered how Wiremu’s circumstances had changed and how the accident had affected his mental health.

After reflecting on the situation, the lender decided to write off Wiremu’s debt in full on compassionate grounds.

“Lenders are sometimes criticised for lacking empathy and unfairly pursuing debt recovery action. This case is an excellent example of a lender doing all they can to help a borrower. The lender looked at the individual circumstances and considered the extent to which Wiremu’s circumstances had changed. His friend’s death impacted Wiremu profoundly and given this was a first car and a large loan, the accruing debt would have further added to his difficulties,” explains FSCL Chief Executive Officer, Susan Taylor, adding that the lender had shown considerable compassion.

“This case also serves as a reminder to consumers to make sure that the insurance they have is right for them. It is important to remember the onus is on the insured person to read the insurance policy. The lender may ask for proof that the vehicle is insured, but they will probably not review the policy details. It is important that the borrower reads the certificate of insurance and policy wording. If someone else is driving your car and is not named on your insurance policy, ensure that you update your policy to include them, otherwise you may not have cover if an accident happens.”

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