$1.5 million in fees and interest returned to borrowers

Media release

Issued 24 August 2016
Release no. 21

$1.5 million in fees and interest returned to borrowers after insufficient disclosure

Lenders Adelphi Finance Ltd and Shaw Personal Finance Ltd have refunded customers or reduced customer account balances by over $1.4 million and $100,000 respectively after the Commission warned they were likely to have breached consumer credit laws.

Changes made to the Credit Contracts and Consumer Finance Act 2003 (CCCFA) last year included an expansion of the key information that lenders must disclose before a loan is entered into. 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 were unlikely to comply with the CCCFA because they did not include all of the required key information. 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), and 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.

Both Adelphi Finance and Shaw Personal Finance promptly and voluntarily refunded the relevant interest and credit fees to customers. 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. The Commission has warned Adelphi Finance and Shaw Personal Finance about their conduct.

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. 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,” Ms Rawlings said.

These latest refunds for non-compliant disclosure to borrowers follow on from a case in March this year where payday lender, Cash in a Flash, refunded $122,365 to customers. You can read more here.

Background
The total amount refunded to customers by Adelphi Finance to date is $1,452,494. A further $6,826 remains outstanding to past debtors who Adelphi Finance is trying to contact.

Shaw Personal Finance has refunded or credited debtors a total of $106,684.

In May this year the Commission reminded lenders that failing to disclose the required information to borrowers about their credit contracts could result in the repayment of all fees and interest. You can read more here.

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