Finance company Aotea West Auckland has been fined $48,750 for taking security over prohibited items such as beds and cooking equipment.
In the Commerce Commission’s first such prosecution, Aotea West Auckland pleaded guilty to five representative charges under the Credit Contracts and Consumer Finance Act 2003 (CCCF Act) for offending which occurred between June 2015 and March 2016.
The CCCF Act prohibits lenders from using essential cooking and medical equipment, portable heaters, washing machines, refrigerators, beds and bedding, and critical identity and financial documents as security for loans, meaning that lenders cannot repossess these items if the borrower fails to make payments.
Of 52 sample contracts viewed by the Commission, 19 contracts showed a security interest unlawfully claimed over prohibited items.
“These goods are protected by law because, generally, they are worth more to borrowers than they are worth as security for loans. Lenders may not use the threat of repossession of these goods to encourage borrowers to pay,” says Commissioner Anna Rawlings.
The Commission reports that, in sentencing in the Waitakere District Court, Judge June Jelas said “the legislation is designed to protect the vulnerable, and high standards are required of those who operate within it.”
She said she accepted “there was no repossession, or risk of repossession, given the lender’s policy, but by entering into the contract the borrowers, who were generally vulnerable, believed they were at risk of losing items that were of high value to them.”
Judge Jelas said the level of harm and stress that could be caused to borrowers by the offending is difficult to quantify, but that a high level of deterrence should be applied.