Photo: RNZ
A borrower has had his entire loan payments refunded after it was discovered a vehicle dealership had claimed a boarder on his application who did not exist.
The man saw a Ford Ranger he wanted to buy advertised for $50,000 on Facebook by a dealership in Auckland.
The dealership delivered the vehicle to the top of the South Island for him and arranged a loan with a lender. The buyer completed the forms online.
The loan had an interest rate of 13.95 percent and the borrower agreed to pay back $270 a week.
But he struggled to keep up payments when he hit employment issues and asked financial mentor Jane Gibbin for help.
She asked the lender for the affordability and suitability assessments it used for his loan and discovered that the application included income of $200 a week from a "boarder". There was a declaration signed by this person.
But the buyer said he knew nothing about it and was a renter himself.
"The signatures looked very dodgy. They were blurry and had been written over twice. My client had never heard of the person named on the form," Gibbin said.
She said she was concerned about her client and also about the boarder, so did a search online.
The only person she could find by that name was in prison in a different part of the country.
The lender tried to contact the salesperson who dealt with the loan application but he had gone to India.
"The lender just wanted to wash their hands of this messy situation so refunded [the buyer] all payments he had made. This was a total of just over $6000," Gibbin said.
The vehicle was returned to the dealer and the man bought a cheaper, smaller vehicle.
"It shows the importance of requesting the affordability assessments and reviewing them with your client," Gibbin said.
Lenders have an obligation to ensure that loans are likely to be affordable for borrowers.
They need to keep records to show they have met their responsible lending obligations, including the inquiries made and how they satisfied themselves that the borrower could cope with the loan.
If asked, they have to make copies of the records available to the Commerce Commission or any borrower, free of charge, within a specified timeframe.
Breaches of the lender responsibility principles can attract penalties of up to $600,000 for a company and $200,000 for an individual plus statutory damages equal to the cost of borrowing.
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