Proceedings have been filed at the High Court against finance company Linsa Finance, with the Commerce Commission pursuing orders that the company return borrowing costs of approximately $680,000 for over 1,700 loan contracts.
In the alternative, the Commission is also seeking that Linsa Finance pays statutory damages to affected borrowers.
Linsa Finance is a ‘family owned, independent finance company’ offering secured loans of up to $2000 and personal unsecured loans of up to $1000. It has offices in Auckland and Tauranga and its annual interest rate in-branch is 49.75%, with setup fees and other charges also applicable.
“The Commission alleges that between 6 June 2015 and 29 March 2016 Linsa Finance’s loan contracts failed to include some of the key disclosure information required under the Credit Contracts and Consumer Finance Act 2003 (CCCFA),” the Commerce Commission said in a statement.
“The alleged deficiencies affected 1,721 loan contracts. Failure to disclose the key information means that borrowers are not liable to pay interest or credit fees charged by the lender during the period of non-compliance.”
The CCCFA currently states that a borrower is not liable for the costs of borrowing during a period where a lender has failed to comply with the disclosure requirements of the Act.
Recent research highlighted that 9 out of 10 budgeting services believe high-interest loans almost always leave borrowers worse off, with those on lower incomes being disproportionately affected. An ongoing CCCFA review is looking at more rigorous affordability assessments and stronger enforcement action in cases of lender non-compliance.