Seek a financial mentor, Kiwis struggling with debt told

"Pause and get sorted," IFSO says

Seek a financial mentor, Kiwis struggling with debt told

This Money Month, New Zealanders who are struggling to repay debt are encouraged to “pause and get sorted” by contacting a free financial mentoring service.

Karen Stevens (pictured above), Insurance & Financial Services ombudsman (IFSO), said financial mentors not only can help people with budgeting advice, they can also help consumers file a complaint if they are concerned about a lender not lending responsibly.

The IFSO Scheme is a free service that helps consumers resolve complaints about insurance and financial services. It is one of four dispute resolution schemes of this type in NZ, the other three being Financial Services Complaints Limited (FSCL), the Banking Ombudsman Scheme, and Financial Dispute Resolution Service (FDRS).

In a statement, IFSO said a recent case investigated by the scheme had been resolved with the help of a financial mentor, who assisted their client in getting a loan sorted and claiming a refund of interest and fees.

Jake, who found himself in financial difficulty after a few years of taking out a car loan, sought a financial mentor for help. The financial mentor helped him file a complaint to the IFSO scheme, saying the loan was not affordable and in breach of the Credit Contracts and Consumer Finance Act 2003 (CCCFA).

“Lenders are required by law to check whether borrowers will be able to meet their payments without suffering substantial hardship,” Stevens said. “They need to do this by getting reliable information and making sufficient inquiries about a person’s income and expenses.”

In Jake’s case, the affordability calculation used for his loan was based on him working 33 hours of overtime in a fortnight when no written records existed confirming the overtime, nor was there anything to prove the lender had made “reasonable inquiries” to check the overtime was reliable.

The IFSO Scheme held that the affordability calculation should have been based on a lower monthly income, to factor in any possible changes in Jake’s overtime hours. Also, the lender made an error in its calculation of one of Jake’s expenses, when it left out his regular payment for vehicle insurance.

Like the financial mentor, the IFSO, too, believed that the CCCFA had been violated. The lender has been ordered to refund all interest and fees paid on the loan, with no further interest payable, which was a really great result for Jake.

The IFSO Scheme typically assists financial mentors and their clients by applying the remedies set out in the CCCFA, although there were times, Stevens said, that consumers seek a lot more than their entitlement under the law.

“They think they should get a refund of interest and fees and the loan wiped and be able to keep the vehicle,” she said. “However, that is not possible in the majority of cases we see. We can only apply the remedies under the CCCFA. Those remedies are limited to a refund of fees and interest.”

It’s when clients understand how the CCCFA works and what remedies are available that financial mentors can assist them.

“There’s nothing worse than someone being under financial pressure and getting the wrong information, so they get their hopes up,” Stevens said. “It’s great when financial mentors can guide them through and explain about CCCFA remedies right from the beginning; it stops misunderstandings and disappointment later on.

“Jake did the best thing possible by contacting a financial mentor to help. He was supported to make a complaint about his lender and got a positive outcome.”

The ombudsman said this year’s Money Month is all about pausing to take a moment to find opportunities and get sorted. 

“If people are struggling with debt, we recommend they get in touch with a financial mentor – they can be really supportive, and they can also easily access the approved dispute resolution schemes to help if needed,” Stevens said.

People can find a financial mentor near them through Money Talks or by calling 0800 345 123. To file a complaint against a lender to the IFSO Scheme, they can do so via or by calling 0800 888 202.

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