Auto Finance Direct and Pacific Loans agree to refund $600,000 in excessive and unfair lending fees

Tuesday, 5 March 2019

Pacific Loans has agreed to pay nearly $135,000 to 82 borrowers after reaching an agreement with the Commerce Commission over its lending practices.

The Commerce Commission has settled with two finance companies to return nearly $600,000 in unreasonable fees.

Motor vehicle lender Auto Finance Direct Ltd has agreed to return $460,000 to 5000 borrowers which the commission said were unreasonable under the Credit Contracts and Consumer Finance Act.

Have you had an experience with these lenders? Contact debrin.foxcroft@stuff.co.nz

Pacific Loans has admitted to breaches against the Fair Trading Act 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.

The Auckland-based company has been ordered to repay more than $130,000 in fees it should not have charged borrowers.

Borrowers from two finance companies be repay nearly $600,000 in unfair fees.

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Commerce Minister Kris Faafoi has repeatedly promised the Government will crack down on predatory lenders.

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Commissioner Anna Rawlings said the consumer watchdog had been closely monitoring lending behaviour and potential breaches of lending laws.

'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,' Rawlings said.

'Proper fee setting enables borrowers to better compare the cost of different loan products.'

In May 2016, the Supreme Court ruled that credit fees should cover only the costs that are related to particular loan transactions.

Fees should not be used to recover general business costs or to generate profits, the court ruled.

Both companies agreed to repaying fees to borrowers subjected to the unlawful fees.

Commerce and Consumer Affairs Minister Kris Faafoi, has previously said the Government was committed to clamping down on predatory lending.

Both Auto Finance Direct and Pacific Loans have been approached for comment.