Woman Discovers She Was Unknowingly Added to Husband's Business Loan

A woman recently discovered she had been added as a guarantor on her husband's business loan without her knowledge or consent, leading to a complaint to Financial Services Complaints Ltd (FSCL) when the business defaulted and she was called upon to repay the debt.

The case is one of 1,469 complaints received by FSCL in the year to June 30, a significant increase from the previous year’s 1,426 complaints and nearly double the number from five years ago. This surge highlights growing concerns in the financial sector, particularly regarding transparency and consumer awareness.

FSCL chief executive Susan Taylor emphasized the importance of clear explanations and proper disclosure when involving individuals as guarantors, especially in high-stress situations like small business loans. "Especially when small businesses are borrowing under stress," she said.

The woman in question was offered a solution by the lender to extinguish her guarantee and release their security for her half share of the family home. However, the situation underscores the need for better communication and transparency in financial dealings.

According to Taylor, complaints about lenders made up the largest share of FSCL’s cases at 38 percent. Of the 366 cases formally investigated, financial advisers—covering mortgage and insurance brokers, as well as wealth advisers—accounted for the largest proportion at 23 percent, followed by lenders at 20 percent, and insurers at 17 percent.

Taylor noted a rise in complaints from small businesses, particularly concerning loans and insurance products. She attributed this to increased awareness of consumer rights, as well as the broader economic environment in which many New Zealanders and small businesses are struggling financially.

"When people are living with financial stress, they are more likely to complain," she said. "There's also a lingering effect from the pandemic, with many businesses still dealing with debt burdens. Additionally, there's less tolerance now for when things go wrong. People are more likely to want their complaints heard now than in the past."

FSCL also plays a crucial role in identifying potential systemic issues that may need further attention from regulators. While financial providers have improved their processes, Taylor said there is still room for growth.

"Sometimes people have to do a Google search or talk to a lawyer or friend before they know they can take a complaint to FSCL," she said. "Providers are meant to refer people to their third-party dispute provider when relevant."

Taylor acknowledged that complaining can be difficult for some individuals, especially those already juggling multiple challenges in life. "It's one more thing too many," she said. "That's where third-party support like financial mentors plays such a vital role."