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FOS Admits Error In Final Determination

Thursday, June 28, 2018 - Posted by Michael McCulloch

The Financial Services Royal Commission has recently heard evidence from a widow that the Financial Ombudsman Service (FOS) made a Determination that she should pay her deceased husband's business loans worth $226,000 over a period of 12 to 18 months.

The evidence was highlighted after the widow, Jennifer Low, was pursued by Suncorp for the repayment of business loans that were provided to her and her late husband after a workplace accident claimed Mr Low's life in 2016. It is understood that Ms Low approached the Consumer Action Law Centre for assistance when Ms Low proposed to pay off the outstanding debt over the loans original 17 year term with monthly repayments of $1,111 which was higher than the contractual repayment however FOS declined her proposal.

FOS found that it would be reasonable for Ms Low to repay the loan, interest free, within 12 to 18 months or a maximum of 5 years. During the hearing, Phillip Field, Lead Ombudsman for Banking and Finance was forced to explain his decision where he claimed that he did not want Ms Low to be still paying the debt in her 80's. Mr Field told the royal commission, "What I had in mind was that situation where you had somebody who was in their 60s paying it until they’re 80. And certainly, from my perspective, if a bank were to lend to somebody in that scenario, I would regard that as not reasonable." He went on to say in the witness box, "In hindsight, I don’t think that was the correct thing to do. I think I should have accepted that the [Consumer Action Law Centre] position was correct and then got on the phone to the bank then and there to try and resolve the matter. I should have said that… once the arrears were cleared on — and at the time of that call it was, but provided the arrears — any arrears on the interest-free loan were also cleared, then if she could make those payments, she was entitled to do so and it would be interest-free until it was paid off."

While the Low Family has not yet accepted Suncorp's offer to extend the repayment period to 5 years instead of 12-18 months, Mr Field said that he expects the bank to change their position and allow Ms Low to make monthly principal-only repayments for the duration of the loan as per her original proposal.

Source: mortgagebusiness - May 2018

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