The Commerce Commission says thousands of borrowers from two finance companies will receive a total of about $590,000 in refunds following settlement agreements with the Commission.
Motor vehicle lender Auto Finance Direct Ltd has agreed to return approximately $460,000 in fees which, in the Commission’s view, were not reasonable and Pacific Loans Ltd will return more than $130,000 in fees that it accepts should not have been charged.
“Consumers will benefit because both these lenders have entered settlement agreements with the Commission, have changed their practices, and have agreed to remediate borrowers who were affected by their conduct,” says Commissioner Anna Rawlings.
Auto Finance Direct
Auto Finance Direct has accepted that between April 2015 and August 2018 it charged more than 7,200 fees which were likely to be unreasonable under the Credit Contracts and Consumer Finance Act 2003. The fees, which were charged to more than 5,000 borrowers, were:
- an establishment fee over $190
- an early settlement fee over $65
- a variation fee over $55.
“The Commission has been actively monitoring credit fees charged by lenders to assess whether fees cover costs that are closely related to the particular loan transaction, as required by consumer credit law. Proper fee setting enables borrowers to better compare the cost of different loan products," says Ms Rawlings.
Pacific Loans assigned distressed loans to B&D Holdings Ltd (In Liquidation) for collection.
Pacific Loans has agreed that it breached the Fair Trading Act 1986 by representing that it had the right to add interest and fees to loan accounts after repossession and sale of borrowers’ assets, when this was not the case.
Adding those costs was prohibited under the Credit (Repossession) Act 1997 (now repealed), under which a loan balance was frozen when repossessed assets were sold.
Pacific Loans has agreed to return a total of $134,779.23 to 82 affected creditors.
“Pacific Loans has undertaken to credit loan accounts by 28 February 2019. It has stopped charging interest and fees after repossession and sale action,” Ms Rawlings says.
Separately, B&D Holdings has been warned that, in the Commission’s view, it likely breached the Fair Trading Act by representing that it was entitled to add interest, fees and commission to debtors’ loans after repossession and sale of loan securities.