The Christchurch District Court has found company director Hugo Barton Kearney personally liable for his company, Kearney Finance (NZ) Limited, breaching the Fair Trading Act and has fined him $20,000 plus $1,430 costs.

Commerce Commission Chairman Peter Allport said that the Commission prosecuted Mr Kearney and his company for allegedly making misleading claims about fees that customers would have to pay for loans.

Mr Allport said that the Court's decision is a warning to all financiers, brokers and financial institutions, they must give their customers accurate information about the cost of loans.

"If behaviour like Mr Kearney's is allowed to go unpunished, then it encourages other lenders, and sometimes forces them, to do the same to compete," Mr Allport said. "That has potential to cause great harm to many people."

In Court, the Commission described Mr Kearney and his company as lenders of last resort who deliberately made misleading statements to take advantage of people in financial difficulty.

Mr Kearney and his company had at times charged fees more than 10 times higher than he had told customers they would be.

Mr Kearney and his company also did not disclose additional fees that customers would have to pay to Dorchester Capital Limited if Mr Kearney arranged loans from that firm. Dorchester's fees were up to another $8,000 on top of the fees charged by Kearney Finance.

In one case Mr Kearney told a customer fees would be around $1,000. Total fees demanded by Kearney Finance and Dorchester were $15,792.91.

Demands for fees were enforced through the Disputes Tribunals and with caveats that prevented customers arranging alternative loans or even selling their own properties. Customers incurred legal costs to have the caveats removed and in one case a person could not get a mortgage from a bank because of a caveat.

Mr Kearney was also prosecuted for making misleading claims about a customer's rights under the broker's agreement he used.

At a trial in the Christchurch District Court in February Mr Kearney and his company pleaded not guilty. In September the Court found them both guilty, and the sentencing decision was released on Friday afternoon.

In his written decision Judge T.M.Abbott stated that he had fined Mr Kearney but had convicted and discharged the company because "Kearney Finance is in effect a shell, with no means to pay any fines which I might impose".

Media contact: Fair Trading Manager Rachel Leamy

Phone work (04) 498 0908

Communications Officer Vincent Cholewa

Phone work (04) 498 0920

Commission media releases can be viewed on its web site www.comcom.govt.nz