Denise purchased a car in 2004 and it became a nightmare. Around the global financial crises in 2007, the loan was converted into a ROA Loans Company (not real name) loan picking up additional security in the contract without Denise’s knowledge or agreement.
The interest rate was 24% charged and added weekly to ensure maximum compounding interest, the administration fee was $5 per week and also charged weekly, the amount of the loan being $10,000. The monthly interest was $200, administration fee $20 per month and monthly repayment $260 – thereby only $10 per week was actually going toward paying the principal. Penalties were an additional 12% plus a $5.77 default fee, all compounded weekly.
In early 2008 the car broke down. Now there was little incentive to keep paying on a debt with such high repayment rates that was not reducing. The car was repossessed 12th February 2008 and sold 8th April 2008 and in this time fees were added that totaled $1,186 including a tracing fee, phone calls, service fees, storage, and repossession charges.
The car was sold for only $300.
When the car broke down the debt was recorded as $11,000.
After the car was sold less than 3 months later, the debt had ballooned to $14,000 (and the statement includes a $500 advance being given in this time which Denise did not receive).
From mid-2008 to 2013 a court attachment of $20 weekly was in place paying back approximately a further $6000. In 2013 Denise was asked to increase the payment to $32.50.
This continued till August 2014 when, with the outstanding balance quoted as $5,000, ROA Loans Company asked her to increase the weekly repayments to $68. The BA negotiated a payout figure of $2,500. As this fell within the Debt Relief maximum, it enabled the family to be rid of the emotional fatigue that had gone on for so long, and the demand for increased repayments. Her $10,000 dollar loan had cost her just under $26,000 over an 11 year period. The BA said the family were so relieved that ROA Loans Company had gone from their life forever.
Note: all names including those of the loan companies have been changed. Any re-publishing of these case studies need the permission of Ngā Tāngata Microfinance Ltd.
Denise’s weekly budget prior:
|Supported Living & Job Seeker||$324.54|
|Family Tax Credit||$286.05|
|Expenditure & Debt|
|Work and income||$20.50|
|Credit union loan||$40|
|Credit union L/P||$5|
|Accident Insurance payment||$10|
|Clothing||no money for clothing|
This leaves only $205 for Groceries for 2 adults and 4 children.
After the DRLS at $30 per week and elimination of the bank fees, money for food increased to $265.