High-cost lender Moola agrees to hand back $2.8 million to borrowers

Wednesday, 3 March 2021

Data from the Reserve Bank shows many households have been paying down their consumer debts.

High-cost lender Moola will repay $2.8 million to borrowers which it took in unreasonably high fees.

The lender agreed to make the repayments after an investigation by the Commerce Commission.

The commission said Moola charged unreasonable credit and default fees for its loans, which borrowers applied for online.

Before the introduction of a daily rate of charge cap in June 2020, Moola offered loans with interest rates as high as 620.5 per annum.

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Payday loans are short-term, high-interest loans supposed to be repaid when the borrower is next paid by their employer.

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It's “payday” loans were marketed as being for short terms.

The commission began its investigation into whether the lender broke the legal ban on charging unreasonable fees after being tipped off by a Christchurch budget advisory service.

The commission said in September 2017 the district court raised concerns about the level of Moola’s fees, and invited the Commission to intervene in debt recovery proceedings taken by Moola.

Moola charged unreasonable fees between February 2016 and July 2017, the commission said.

These included unreasonable loan set-up fees, unreasonably high default fees, breaching the Credit Contracts and Consumer Finance Act 2003.

During the period, the commission said Moola charged default fees of $60 where the reasonable fee as calculated by the Commission was from $10.24 to $15.66.

Commerce Commission chair Anna Rawlings says the commission is also taking action against Moola for alleged breaches of responsible lending rules.

Moola’s loan establishment fees were between $150 or $350 depending on the term of the loan, where the reasonable fee as calculated by the Commission was either $4.47 or $5.48.

It also charged “processing” fees of $50 where the reasonable fee as calculated by the Commission was either $10.86 or $12.25.

Commission chair Anna Rawlings said: “Fees must recover costs that are relevant and closely connected to the activity for which the fee is charged.”

“The commission’s view is that Moola’s fees recovered more than those costs,” she said.

Moola cooperated with the commission’s investigation, she said, and reduced its fees prior to and again during the investigation.

“In light of the business disruptions caused by Covid-19, the commission agreed that it would allow Moola six months to calculate the refunds it owed customers before the public was notified of the settlement,” Rawlings said.

“Affected customers will be credited or refunded by Moola within the next 12 months,” she said.

Moola would confirm it has complied with agreement by providing a final report prepared by an independent accountant approved by the Commission.

Rawlings said the Commission had also taken High Court proceedings against Moola alleging that it had broken responsible lending rules.

”That matter is unaffected by the settlement relating to unreasonable fees,” Rawlings said.