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Christchurch finance companies fined $103,500 - CC

Contributor:
Fuseworks Media
Fuseworks Media

Two Christchurch finance companies have been fined a total of $103,500 and ordered to pay more than $21,000 in statutory damages to borrowers, because some of their loan contracts included security interests taken over prohibited consumer goods, meaning that the companies could repossess them if the borrower did not make payments on the loan.

Alternate Finance Limited and Crester Credit Company Limited are third-tier lenders with the same sole director and lend predominantly to consumers in and around Christchurch.

Each company had earlier pleaded guilty to four representative charges under the Credit Contracts and Consumer Finance Act 2003 (CCCFA), for failing to ensure their credit contracts did not take security interests over prohibited consumer goods.

The Commission reviewed 68 sample Alternate Finance contracts, of which 56 showed security interests over prohibited items. Of 53 Crester Credit contracts reviewed, 43 showed security interests claimed over prohibited items. The items included: washing machines

refrigerators

microwaves

beds

"The CCCFA prohibits taking a security interest over essential consumer goods such as washing and cooking equipment, and lenders must ensure their contracts do not allow for that to happen. These goods are protected because they are generally worth more to consumers than they are to lenders as security for loans. The companies did not attempt to seize any of the prohibited household items but the case emphasises that lender contracts cannot suggest that seizure might happen," said Commissioner Anna Rawlings.

In sentencing in the Christchurch District Court on 13 March, Judge Josephine Bouchier said there was "reasonably significant carelessness" and "the objectives of the [CCCFA] were undermined because the enactment was for the protection of vulnerable consumers."

In addition to the fines, the Court ordered both companies to pay a total of $21,237.82 in statutory damages to 99 borrowers.

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