Two lenders have refunded their customers a whopping total after a warning from the Commerce Commission they were likely to have breached consumer credit laws.
Lenders Adelphi Finance Ltd and Shaw Personal Finance Ltd have paid back refunded over $1.4 million and $100,000 respectively to customers or reduced customer account balances after the Commission issued a warning they likely had breached consumer credit laws.
key information that lenders must disclose before a loan is entered into was expanded on after changes were made to the Credit Contracts and Consumer Finance Act 2003 (CCCFA) last year. Failure to disclose the key information to borrowers means the lender must refund any interest or credit fees they charge during the period of non-compliance.
The Commission said the consumer credit contracts of Adelphi Finance and Shaw Personal Finance did not include all the key information and so were unlikely to comply with the CCCFA.
According to the release, this included not providing borrowers with:
• the lender’s registration number as a financial service provider
• a full description and explanation of the security interests taken (if any)
• details about the timing of the borrower’s right to cancel and the borrower’s right to apply for relief on grounds of unforeseen hardship.
The Commission has warned Adelphi Finance and Shaw Personal Finance about their conduct and both lenders voluntarily refunded the relevant interest and credit fees to customers without delay.
They also withdrew from pursuing all interest and credit fees not yet paid to them during the period of non-compliance, and corrected their disclosure.
Commissioner Anna Rawlings said it is vital that borrowers have all the information they need to make an informed decision before taking out a loan.
“In these cases, the lenders have responsibly met with their obligations once the breaches were revealed, and have as soon as possible refunded the money owing – as the Act requires,” said Rawlings.
“This means that for the period of non-compliance the lenders are not able to make a profit on the loans and will need to meet their own costs.
“Lenders need to be aware that these are the consequences of getting disclosure wrong. They could also face the possibility of criminal enforcement action and fines, in addition to refunding customers in some cases,” Rawlings said.
key information that lenders must disclose before a loan is entered into was expanded on after changes were made to the Credit Contracts and Consumer Finance Act 2003 (CCCFA) last year. Failure to disclose the key information to borrowers means the lender must refund any interest or credit fees they charge during the period of non-compliance.
The Commission said the consumer credit contracts of Adelphi Finance and Shaw Personal Finance did not include all the key information and so were unlikely to comply with the CCCFA.
According to the release, this included not providing borrowers with:
• the lender’s registration number as a financial service provider
• a full description and explanation of the security interests taken (if any)
• details about the timing of the borrower’s right to cancel and the borrower’s right to apply for relief on grounds of unforeseen hardship.
The Commission has warned Adelphi Finance and Shaw Personal Finance about their conduct and both lenders voluntarily refunded the relevant interest and credit fees to customers without delay.
They also withdrew from pursuing all interest and credit fees not yet paid to them during the period of non-compliance, and corrected their disclosure.
Commissioner Anna Rawlings said it is vital that borrowers have all the information they need to make an informed decision before taking out a loan.
“In these cases, the lenders have responsibly met with their obligations once the breaches were revealed, and have as soon as possible refunded the money owing – as the Act requires,” said Rawlings.
“This means that for the period of non-compliance the lenders are not able to make a profit on the loans and will need to meet their own costs.
“Lenders need to be aware that these are the consequences of getting disclosure wrong. They could also face the possibility of criminal enforcement action and fines, in addition to refunding customers in some cases,” Rawlings said.
