The Commerce Commission has warned six south Auckland credit providers, and will prosecute a seventh, for allegedly failing to provide important information to customers taking out personal loans. Adequate disclosure is required under the Credit Contracts and Consumer Finance Act (CCCF Act).

The six credit providers that have been warned by the Commission are: Mana'ia Financial Services, Sala Multi Services Ltd, Winston's Finance, Houmatetefa Finance, Mizpah Trading Co. Ltd, and Funaki Enterprises. The Commission will not be commenting further on the prosecution of the seventh credit provider at this stage.

The credit providers predominately target Pacific Island consumers by advertising in Pacific language newspapers. They provide short term cash loans, usually of relatively small amounts. Traditional Tongan mats are often used as security for the loans.

The Commission found that the six warned credit providers allegedly failed to:

 Advise customers of their statutory right to cancel the loan within a certain period of time;
 Disclose the annual interest rate and the amount of interest payable;
 Advise customers of the costs of full prepayment;
 Describe adequately property subject to security interests.

"Disclosure of information is the cornerstone of the CCCF Act," Graham Gill, Fair Trading Manager Auckland said. "It gives consumers the ability to make informed choices about the true cost of credit, to compare competing credit offers and be aware of both their rights and obligations under the contract."

"It is essential that consumers understand what they are committing to when entering any credit contract, which is why the disclosure requirements are written into the legislation. The annual interest rate and credit fees payable under the contract, for example, are key parts of the disclosure requirements. The disclosure requirements of the Act also assist consumers to understand how and when they can cancel the contract as well as what they might have to pay if they repay the contract early."

Credit providers who breach the Act risk damaging their reputation and incurring financial penalties, Mr Gill warned. "Breaches of the Act can result in a criminal conviction, fines and statutory damages. Repeat offenders can be banned from providing credit."

"Credit providers should understand that non-compliance with the disclosure requirements of the CCCF Act will be treated seriously by the Commission," Mr Gill said.

The Commission has taken a number of enforcement actions against credit providers failing to meet the disclosure standards, and will continue to take action to drive compliance with the CCCF Act.

Background
CCCF Act Credit Contracts and Consumer Finance Act - A general guide for the credit industry can be downloaded from the Commerce Commission's web site www.comcom.govt.nz

Other action taken by the Commission under the CCCF Act includes:
Senate Finance Limited 15 November 2006. Senate Finance pleaded guilty to 17 breaches of the CCCFA for not adequately disclosing terms and conditions of its loans.

Falcon Advances Limited 21 December 2006. The Commission settled with Falcon Advances Limited over a number of matters including a failure to give key information to customers. Falcon Advances refunded a total of $12,000 to 143 customers.

Dolbak Finance 25 May 2007. Dolbak Finance pleaded guilty to 22 charges of breaching the CCCFA. Charges included failure to disclose. The partners of the car finance business, David Dolbel and Anthony Baker were fined total of $100,000 and paid statutory damages of $46,600.

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