Commerce Commission welcomes penalties against third tier lender
28 June 2012
A third tier lender who breached a number of provisions of the Credit Contracts and Consumer Finance Act (CCCF Act) has been sentenced today in the Christchurch District Court.
Barry Hunt was fined $18,532 and ordered to pay $1,461.79 in court costs.
Mr Hunt was prosecuted by the Commerce Commission in relation to 15 loan contracts he entered into between September 2006 and August 2007 with 11 different debtors. The contracts did not meet crucial conditions under the CCCF Act.
- The contracts failed to disclose the full name and address of the lender. Barry Hunt used a range of business names none of which were legal entities. He was also an undischarged bankrupt at the time of the offending.
- The contracts failed to specify the annual interest rates the borrowers would pay. The loans either stated an interest rate significantly lower than was actually applicable, or referenced a weekly or fortnightly interest rate. The actual interest rates charged ranged from 29.5% to 1738%.
- The contracts misled consumers about the method of calculating the interest rate.
Judge Saunders said his starting point for the fines to be imposed was $50,000. This was reduced to a total of about $20,000 because of Mr Hunt's limited ability to pay.
"Third tier lenders are dealing with the most vulnerable consumers. They are people who have been declined credit with first and second tier lenders, and so their circumstances can result in them accepting otherwise unacceptable terms and conditions. It is reprehensible that such lenders will take advantage of these consumers in the way Mr Hunt did," said Commerce Commission Competition Manager, Stuart Wallace.
"Consumers need to be able to accurately assess the total cost of credit so that they can make comparisons with other credit options and make informed decisions," said Mr Wallace.
"It has taken a long time to bring this case to fruition. The Commission would much prefer to see third tier lenders come into line with the CCCF Act than have to take lengthy and costly court proceedings. However where conduct such as this is so blatant, we can and will prosecute to send a deterrent message to others in the sector," said Mr Wallace.
Judges Saunders emphasised the purpose of the legislation in protecting vulnerable borrowers who live in a society with a 'have it now' mentality, and the importance of being able to compare interest rates to see the true cost of borrowing.
The Credit Contracts and Consumer Finance Act 2003 regulates consumer lending, consumer leases and buy-back transactions, requiring the disclosure of certain information to consumers entering into consumer credit contracts and providing rules that relate to interest, payments and credit fees.