Hardship application after the repossession warning
Ravi, 41, is a solo parent working two jobs. He has a car loan with $23,500 outstanding, 14 months remaining and repayments of $210 a week. He has missed three payments, leaving $630 in arrears. The lender adds a $180 default fee, sends a letter headed “repossession in five days” and says the car will be collected unless $810 is paid immediately. Ravi calls to say his hospital orderly hours have been cut from 40 to 28 a week and he can offer $90 a week. The lender’s collections officer says, “We don’t do hardship - pay or the car goes.” Ravi submits a written hardship application the same day, attaching payslips and a budget.
1. Explain the lender’s legal obligations once Ravi’s written hardship application is received, including timeframes and enforcement.
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Once Ravi applies in writing, the lender must treat it as a hardship application under the CCCFA. It must acknowledge the application, assess his changed circumstances and respond within 15 working days, unless a longer period is agreed. It must consider whether the contract can be varied in a way that is reasonably practicable - for example by reducing payments for a period, extending the term, deferring payments or capitalising arrears - and it must give reasons if it declines.
The lender should suspend repossession action while the application is being assessed. Continuing to threaten or take the car before responding is likely to breach the hardship provisions and may be treated as oppressive conduct. The “repossession in five days” letter and the statement that the lender “doesn’t do hardship” are serious red flags. The lender should also check that the $180 default fee is a reasonable estimate of its actual cost and was disclosed. It must not use the fee to inflate the arrears and then rely on the inflated figure to justify enforcement. All calls, letters, payslips, budgets and the decision should be recorded.
2. Propose a realistic hardship outcome and identify the conduct and record-keeping failures in the lender’s response.
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A realistic outcome is a temporary reduction to about $90 a week for three months, with the shortfall added to the end of the loan or the term extended so the arrears are cleared gradually. The lender should require Ravi to provide updated payslips and a budget, review the arrangement before it ends, and tell him what happens if he misses a payment. If his hours recover, the payment can step back up. If they do not, a further variation or a different repayment plan may be needed. Repossession should be a last resort, not the first response.
The conduct failures include ignoring a written hardship application, making a repossession threat before assessment, and suggesting hardship is unavailable. The $180 fee needs a cost justification. The record-keeping failures include the absence of a hardship decision record, no assessment of the variation options and no evidence that the officer considered Ravi’s budget. The lender should correct the file, confirm the arrangement in writing and ensure the collections team is trained on hardship and dispute resolution. If the car has already been repossessed, the lender should seek urgent advice before selling it.