Finance companies Budget Loans Ltd and Evolution Finance Ltd (together Budget Loans) have been fined $720,000 in the Auckland District Court, on 125 charges under the Fair Trading Act.

The Commerce Commission says they were also ordered to pay a total of $53,000 emotional harm reparations to nine victims, and approximately $38,000 in refunds and credits to borrowers.

Over six years, until 2014, Budget Loans misrepresented its right to repossess goods, and recover interest and costs from borrowers. It also misrepresented amounts borrowers were required to pay under attachment orders and made misrepresentations about the benefits of refinancing existing loans.

Budget purchased the distressed loan books of two finance firms in 2004.

“The court has acknowledged that Budget Loans attempted to create cash flow by getting Western Bay and National Finance borrowers to pay as much as possible for as long as possible. It continually added costs and interests to loans and then repossessed essential goods from borrowers without notice when they couldn’t pay, regardless of whether it was legally entitled to do so,” says Mary-Anne Borrowdale, the Commission’s General Counsel, Competition and Consumer.

Ms Borrowdale says the costs of the repossession were, for the most part, higher than the value of the goods and sometimes Budget Loans threw repossessed goods away rather than sell them on. It also obtained judgments against some borrowers but continued to add interest and costs and demand more from borrowers than the courts had awarded and to misrepresent its right to repossess.

Where loans were not secured Budget Loans sought to convince some borrowers to sign new, secured loans by telling them that they would get a discount on their loan balance. However, the amount of the discounted loan was higher than the amount the borrower was actually required to pay.

“Budget Loans’ conduct and misrepresentations kept vulnerable borrowers in a cycle of debt and repossession. It knowingly engaged in illegal repossessions of essential items from people that it knew were already living in hardship,” says Ms Borrowdale.

Houses stripped bare

The Commission says that in some cases Budget Loans stripped houses almost bare. In June 2016 the court held that in one case the extent of the repossessions “offended justice”.

In sentencing, Judge David Sharp said it was “cynical and deliberate” offending. He said the repossessions were “reprehensible” and were “used as a direct means of coercion”.

“One borrower declared herself bankrupt when told her loan had ballooned from about $9,000 to $57,000. In fact she had less than $2,500 to pay at that time,” says Ms Borrowdale.

During the relevant period the directors of Budget Loans were Allan Robert Hawkins and his son Wayne Robert Hawkins.

“The Commission is seeking banning orders against both men, following this sentencing and the earlier conviction of Budget Loans on 34 charges under the Fair Trading Act in 2010.” says Ms Borrowdale.

Budget Loans was convicted on 106 charges in July 2016. Nineteen charges were dismissed and the Commission successfully appealed that decision.

Budget Loans’ application for leave to appeal to the Court of Appeal was dismissed in November 2017.

Previous decisions in this case can be found here

In 2010 Budget Loans was fined $30,750 on 34 charges under the Fair Trading Act, and it undertook to return $500,000 in overcharged interest and fees to borrowers.