ComCom will be seeking pecuniary penalties for alleged breaches
The Commerce Commission has announced its intention to file civil proceedings in the High Court against Go Car Finance and Second Chance Finance.
The allegations revolve around the lenders’ purported breaches of the Credit Contracts and Consumer Finance Act (CCCFA) during the provision of car finance to borrowers.
Louise Unger (pictured above), general manager of credit at the Commerce Commission, said that the cases followed extensive investigations into the lending practices of both companies. The focus of these investigations has been on whether the lenders adequately assessed borrowers’ needs and financial capabilities when offering car finance.
“In our view, both lenders have not been appropriately assessing loan affordability when making car finance available,” Unger said. “Our legal action will address the potential for these lenders to have caused substantial financial hardship to Kiwi consumers.”
Unger stressed that, like all providers of consumer credit, car finance lenders are obligated under the CCCFA to ensure that any credit provided meets the borrower’s needs and objectives. They must also verify that borrowers can make payments under the loan without suffering substantial hardship.
The Commerce Commission seeks declarations from the High Court asserting that both Go Car Finance and Second Chance Finance breached lender responsibility principles. These alleged breaches involve inadequate assessments of whether consumers could afford their car finance between 2019-2022 and 2021-2022, respectively.
The commission will also seek declarations asserting that Second Chance Finance violated its record-keeping obligations, and its director neglected their due diligence duty to ensure compliance with duties and obligations under the CCCFA.
“For the first time, we will be seeking pecuniary penalties from the High Court for these alleged breaches,” Unger said. “We are also seeking orders for the lenders to pay statutory damages to named borrowers as well as the waiving of any outstanding amounts owed by borrowers where their vehicles have been repossessed.”
The investigations, which concluded in December 2023, have been significant, and the commission is now working through the necessary steps to file civil proceedings in the coming months. As the cases are in the process of being presented before the courts, the commission will refrain from providing further comments at this stage.
To access the ComCom media release, click here.
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