$9k repaid on $14k loan but $8k still to pay: Beneficiary faces losing car

A beneficiary who took out a $14,500 loan for a car could be left without the vehicle and owing $8000, despite having already repaid more than $9000.

Financial mentor Rod Lee said the case was a typical example of “unaffordable and oppressive” lending commonly encountered by those in his industry.

In a submission on proposed changes to consumer lending laws, Lee said while the intent of current rules was “excellent”, not all lenders followed them and those who didn’t often faced few or no consequences.

The Government has proposed several amendments to the Credit Contracts and Consumer Finance Act (CCCFA) which came into force last December and the Responsible Lending Code.

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In its original form, the CCCFA forced banks to take a forensic approach to consumer lending, locking many potential borrowers out and creating a mess for the banks.

Most 18- to 26-year-olds can’t answer these simple consumer law questions. (Video first published on September 25, 2021)

Some of the most controversial aspects of the tougher laws have already been removed, including borrowers being asked about their current living expenses based on recent bank transactions, and consultation has recently closed on a further set of changes.

In his submission, Lee said the intent of the CCCFA was excellent and supported by the Responsible Lending Code.

However, there was a very big ‘but’ to that observation, in that not enough attention had been given to consequences for lenders who breached the act, he said.

That meant unaffordable and oppressive lending was a common occurrence, especially for low-income borrowers, and particularly prevalent in vehicle finance

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