In March 2020, Tawera* borrowed $16,000 to buy a new family car. Alongside the loan, Tawera purchased a health waiver that was intended to help him if he was unable to make his loan repayments due to sickness, hospitalisation, or terminal illness. If Tawera made a successful claim, up to $125 per week would be waived from his loan repayments.
In late 2021 and early 2022, Tawera was unable to work on four occasions due to sickness. In March 2022, he submitted health waiver claims to cover these periods. The lender accepted the claims. They confirmed they would waive three and a half weeks of loan repayments, totalling $437.50.
Tawera then contacted the lender and asked them to pay him the $437.50. The lender refused, so Tawera complained to FSCL.
Dispute
Tawera thought the lender should pay the $437.50 directly to him. He said he was struggling financially after being off work, and really needed the money.
The lender explained that the health waiver did not operate like a normal insurance policy that would pay out money. Instead, the benefit of making a successful claim was that the lender would waive the payments that Tawera was otherwise required to make.
Although this was the normal position, Tawera had already made three of the four payments that were now being waived. This was because three of the periods of sickness Tawera was claiming for were in the past. This meant Tawera’s loan account was in credit by $255.50 after the waiver had been applied. The lender agreed to transfer this to him, but Tawera remained unhappy they would not release the full amount of his claim.
Review
FSCL reviewed the health waiver terms and conditions. These confirmed that the benefit of making a successful claim was that loan payments would be waived. This meant FSCL could not say the lender should pay the full claim amount directly to Tawera. Overall, FSCL was satisfied the lender had correctly followed the waiver terms and had acted reasonably in transferring Tawera the credit balance.
Resolution
FSCL recommended Tawera discontinue his complaint. He did not respond, so FSCL closed its file.
* name changed
Insights for consumers
It is important for consumers to understand the difference between payment waivers and insurance policies. A successful claim on a waiver will not generally result in any money being paid to a consumer, rather the waiver covers the loan payments by paying them directly to the lender.
