His financial circumstances did not improve. When a bank officer called him about the debt, he said he was seeking help from Work and Income New Zealand and was still waiting to hear back about his KiwiSaver withdrawal request. The bank officer asked him to let the bank know if anything changed.

A few months later, after trying repeatedly to call Hiroshi and sending him letters requesting repayment of the overdue amount, the bank issued a demand notice for full repayment of the debt. The bank tried to email him asking him to make contact, but the email bounced back because the bank had entered an incorrect address. When the debt was not paid by the due date, the bank referred it to a collection agency.

Hiroshi had been out of town for several months and realised the seriousness of the situation when he returned home and read the bank’s letters. He called the bank to protest at the debt referral because he thought the bank had not made adequate attempts to contact him. He made a formal complaint and requested personal information, but these were lost by the bank and not actioned. He raised the matter again six months later after the debt collectors started contacting him, and the bank started investigating. He made two further requests for information, but these were not responded to either. The bank eventually supplied the information he had initially requested. The bank offered to reduce the debt by $1,600 and to pay $1,000 for the inconvenience resulting from its failure to respond to his first information request in the timely manner. Hiroshi declined the offer and asked us to investigate.

Our investigation

We found that the bank had failed to advise Hiroshi of his right to seek changes to his credit card contract under the hardship provisions of the Credit Contracts and Consumer Finance Act 2003. Had the bank advised him of this, it might have been able to give him some temporary relief, but the debt referral seemed inevitable given his long-term unemployment and inability to make repayments. If unable to offer him help, the bank was obliged to advise him of this in writing – and he would have had the letter he needed for his KiwiSaver application. But we didn’t think this was the sole reason his KiwiSaver application was declined. A person must also have fully explored assistance from Work and Income, which it seemed Hiroshi was in the middle of doing. None of this, however, would have stopped the referral to the debt collection agency because KiwiSaver funds cannot usually be used to repay credit card debt (only to meet minimum living expenses). We found the bank had followed the correct process for contacting Hiroshi about the debt before referring it to the collection agency.

We also thought the bank had inadequately responded to his initial complaint, resulting in the debt collection agency contacting him when the debt was in dispute. It also hadn’t responded to his first information request in a timely manner and did not respond to his other two information requests at all.

We recommended compensation of $3,000 for the stress and inconvenience Hiroshi had suffered. Better service wouldn’t have prevented the debt referral, but it would have lessened what was already a stressful time for Hiroshi.

Outcome

Hiroshi accepted the $3,000.