Commission Seeks Pecuniary Penalties For The First Time In High Court Civil Action

The Commerce Commission has filed proceedings in the High Court against former high-cost lender Eagle M.A.N Group Limited (Eagle MAN), alleging it breached the Credit Contracts and Consumer Finance Act (CCCFA) when providing credit to borrowers between 2015-2022.

Commerce Commission General Manager Credit, Louise Unger, says in the Commission’s view, Eagle MAN breached high-cost lending rules by charging interest and fees which exceeded 100% of initial loan amounts, and by making high-cost loans available to repeat borrowers.

“High cost lenders charge at least 50% in interest, and so the nature of the loans are often to satisfy a short-term, urgent need for finance. Many borrowers who sign up may therefore be in a vulnerable position when making decisions to take out the loan,” Ms Unger says.

“Restrictions on high cost lenders are in place to provide additional protections for those borrowers.”

In the Commission’s view, Eagle MAN did not meet all those restrictions and its conduct had the potential to cause significant harm or financial detriment.

The Commission also alleges that Eagle MAN breached disclosure obligations by not providing key information to prospective borrowers on its standard contracts, which would have helped them to make informed borrowing decisions.

This case follows a recent review of the high-cost lending market, in which the Commission looked at compliance amongst lenders with high-cost lending rules introduced in 2020.

It is the first proceeding filed under these new rules and is also the first time the Commission has sought pecuniary penalties under the CCCFA since those penalties were introduced in December 2019.

As this case is now before the High Court, the Commission cannot comment further.

Background

High-Cost Lending Rules

There are specific rules under the CCCFA that high-cost lenders need to comply with. The key restrictions on high-cost lending are:

• interest and fees charged on a high-cost loan are capped at 100% of the amount first advanced;
• the rate of charge (excluding default fees) on a high-cost loan is capped at 0.8% per day;
• lenders are restricted from making high-cost loans to some repeat borrowers; and
• lenders have extra disclosure obligations.

Disclosure obligations

Lenders must provide key information to borrowers before a loan is entered into, and at certain times during its life. This key information helps borrowers understand what the loan will cost them and what their obligations are under the loan.

Read more here - https://comcom.govt.nz/business/credit-providers/your-disclosure-obligations

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