Two finance companies found guilty of misleading borrowers

by NZ Adviser18 Jul 2016
Budget Loans Limited and Evolution Finance Limited were found guilty by the Auckland District Court on 106 FTA charges, the Commerce Commission announced on Friday. 

The companies were found guilty of representations made to 21 borrowers while enforcing loan contracts.

Commission chair Dr Mark Berry said the guilty verdict was an important reminder to lenders about what they can and cannot do when seeking to repossess borrowers’ property.

“Borrowers often do not understand their rights under the law and that makes it difficult for them to hold lenders to account,” said Dr Berry. 

“In this case it was budget advisors and community lawyers in Auckland that alerted us to the behaviour, enabling us to investigate and prosecute Budget Loans and Evolution Finance.
  
“The guilty verdict is pleasing and the public can be assured that tackling unlawful repossession activities remains a priority for us in our work enforcing credit and consumer laws. 

“We are committed to ensuring that lenders and other parties comply with credit contract laws throughout the full life of a loan – including when the borrower has fallen into default.”

The Commission said in a statement they had filed proceedings against the companies in December 2014 alleging they misled consumers about their rights by:
• repossessing or threatening to repossess borrower’s property when they did not have a right to repossess
• adding interest and costs to loan balances after borrower’s property had been repossessed and sold, when that is unlawful
• telling debtors they had to make loan payments at a higher rate than had been set by the Court
• telling debtors that they had a shorter time to remedy a loan default before their goods were repossessed than they were allowed under law.

The Commission filed a total of 125 charges against the two companies after which the defendants sought to have 122 of the charges dismissed at a hearing in May this year.

The Court ruled this month that 19 charges should be dismissed due to a lack of certainty about the circumstances in which a lender could continue to charge interest and costs after repossessing and selling consumer goods under a continuing security agreement. 

The Commission said it seeks to have the 19 charges reinstated and to seek permission to appeal the Court’s ruling on this issue.

As this matter remains before the Court the Commission cannot comment further at this time.

The Court’s judgments on this case to date will be available shortly on the Commission’s website.

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