Finance company borrowers are complaining in increasing numbers to a major dispute resolution scheme, with many of the complaints about car loans.
Susan Taylor, the CEO of Financial Services Complaints Ltd (FSCL), says in the year to June 30 complaints about lenders and finance companies more than doubled from the previous year to 39 from 17, comprising more than a quarter of all cases FSCL investigated.
Taylor says the financial product most complained about was consumer credit arrangements, with these accounting for 35, or about 23%, of the 149 complaints investigated. Most involved personal loans to consumers buying motor vehicles. The complainants typically claimed unlawful repossession, or unfair or oppressive conduct by the lender.
“Most lenders have very good processes and only take recovery action as an absolute last resort," says Taylor. "Unfortunately there are a few whose actions are unlawful, unfair or oppressive and they tend to give the industry a bad name.”
Many of the cases FSCL investigated highlighted poor levels of financial literacy, she adds, especially among the likes of low income earners, beneficiaries and people for whom English is 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 difficult for consumers to read, let alone understand," says Taylor.
FSCL tips for consumers taking out loans include;
1) Read the loan contract carefully before signing it;
2) Take time to understand the contract before signing it – there is no need to ‘sign on the spot’;
3) Ask the lender questions if you do not understand a particular clause or clauses;
4) Make sure you know the rate of default interest and charges you will have to pay if you can’t meet loan payments;
5) Make sure you understand what recovery action the lender may take if you default on loan payments;
6) If possible, obtain legal or professional advice, perhaps through a community law centre, before signing the loan contract. And;
7) 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.
Here's the list of lenders FSCL acts as external dispute resolution scheme for.
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