Commerce Commission taking Moola to court over lending
Monday, 8 July 2019
The Commerce Commission is taking short-term lender Moola to court, alleging it breached the lender responsibility principles in the Credit Contracts and Consumer Finance Act.
Moola, operated by NZ Fintech, provides high-cost, short-term loans up to $5000 via the moola.co.nz and needcashtoday.co.nz websites.
The proceedings relate to Moola's conduct between June 2015 and November 2017.
During that period, Moola offered short-term loans with interest rates of between 182.5 per cent and 547.5 per cent per annum, depending on the term of the loan.
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The commission alleges that Moola failed to exercise the care, diligence and skill of a responsible lender, as required by the lender responsibility principles, in that it:
* Failed to make inquiries so as to be satisfied of the borrowers' requirements and objectives
* Failed to make inquiries so as to be satisfied of the borrowers' ability to repay without substantial hardship
* Failed to exercise care, diligence and skill in text and email advertising
* Failed to treat borrowers reasonably and ethically when breaches of loan agreements occurred
* Failed to ensure loan agreements were not oppressive, including interest rates
* Failed to ensure it did not induce borrowers to enter into agreements by oppressive means.
The commission wants a court declaration that the conduct breached the law and and injunction to stop Moola from offering new loans without taking specified steps to ensure it meets its legal obligations.
The commission's investigation was initiated following a referral from a Christchurch budget advisory service.
Lenders entering into consumer credit contracts after June 6, 2015, are required to comply with the lender responsibility principles.
These include that lenders must make reasonable inquiries, before entering the agreement, to be satisfied it is likely the borrower will make repayments without suffering substantial hardship.
In June 2018, the commission launched a lender website review, which looked at the websites of 215 lenders to determine if they were likely to be complying with their responsibilities under the Contracts and Consumer Finance Act. It showed annual interest rates of up to 803 per cent and more than 500 different named fees.
In a statement, Moola said it had co-operated with the Commerce Commission investigation and had worked closely with it to understand its concerns.
'Moola strongly believes its processes for assessing a customer's ability to repay and loan suitability are appropriate for its products.
'The customer and Moola have a shared interest in the customer's ability to repay their loan. As the loan is unsecured with little to no recourse available to the lender, we have a strong interest in ensuring that the on-boarding process of new customers identifies and mitigates the risk of hardship.'
Chief executive Guy Randall said its business practices continued to evolve.
'We are confident that we are a best practice operator and socially responsible lender, Randall said.
'Moola loans are for short-term cashflow needs and are not suitable for every situation, we make this very clear.
'Moola has a strong focus on compliance and strives to be industry leading in this area.
'We don't always get it 100 per cent right. When we do make a mistake, we fix it.
'It is unfortunate the Commerce Commission has decided to seek guidance from the court, however we will defend the claim and welcome any clarity about responsible lending practices that can ultimately be provided,' Randall said.