Insufficient disclosure results in over $100,000 in refunds

17 March 2016

Insufficient disclosure results in over $100,000 in refunds

Payday lender, Cash in a Flash, has refunded customers or reduced customer account balances by a total of $122,365 after the Commerce Commission warned it was likely to have breached consumer credit laws.

The Credit Contracts and Consumer Finance Act 2003 (CCCFA) was amended in June last year. Key changes include an increase in the amount of information that is required to be disclosed by lenders and that this initial disclosure must be made before the loan is signed.

Under this law, a failure to disclose specific key information to borrowers means lenders are unable to enforce any interest or credit fees they charge during the period of non-compliance.

In this case, the Commission alerted Cash in a Flash to the fact that its consumer credit contracts were unlikely to comply with the CCCFA because they did not include all of the required key information. This included not providing borrowers with; their registration number as a financial service provider, the details of the Dispute Resolution Scheme it is a member of and the borrower’s right to apply for relief on grounds of unforeseen hardship.

Cash in a Flash quickly and voluntarily; refunded the interest and credit fees to customers, withdrew from pursuing all interest and credit fees not yet paid to them, and corrected its disclosure. After considering these actions, the Commission has warned Cash in a Flash about its conduct.

Commissioner Anna Rawlings said; “Clear disclosure is essential for customers to understand what they are agreeing to before they make a decision whether to borrow money from a particular lender, or at all. All lenders should provide the right loan information to borrowers and ensure their consumer credit contracts comply with the CCCFA.”

“It has been nine months since the amended consumer credit law came into force and we are regularly taking enforcement action to protect consumers from lenders who break the law. As this case demonstrates, the magnitude of refunds can quickly add up for lenders.”

The Commission has begun a project reviewing levels of compliance with the CCCFA by high cost/short term lenders such as payday lenders. It will be visiting a number of these lenders to review their documents and lending practices to see that they comply with the CCCFA.

Enforcement action, including court action, will be taken when appropriate. The project is expected to be completed by the end of the year.

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