Finance Company admits charging unreasonable credit fees
In an out of court settlement with the Commerce Commission, an Auckland based motor vehicle finance company is to refund around 1,400 affected customers a total of approximately $720,000.
In the settlement, the finance company admitted breaching the Credit Contracts and Consumer Finance Act 2003 (CCCF Act) by charging unreasonable fees.
Customers, who purchased a vehicle from the company with finance through its related finance company, were required to have an electronic vehicle immobiliser device fitted to the vehicle.
The Commission investigation identified that the finance company had in some cases over charged its customers for the cost of the installation and maintenance of the electronic vehicle immobiliser. In every case the finance company had added the full cost of the product over the loan term to the initial loan balance. This was despite them being charged by the supplier on a monthly ‘pay as you go’ basis. Charging the fee before it was due meant that customers were being charged interest on the full amount and would not receive a credit if the loan was repaid early. The finance company admitted that by charging this unreasonable fee it breached section 41 of the CCCF Act.
Customers were also required to purchase a 12 month mechanical warranty which the finance company on-sold from an insurance company. The company added an unreasonable commission to the warranty premium, which in some cases was 280% of the wholesale premium. The finance company has admitted that the commission it charged was unreasonable and breached the CCCF Act.
Commerce Commission Chair Paula Rebstock said, “It is vital that creditors provide consumers with accurate information about the cost of credit- related insurance products in order to allow consumers to make informed choices about the value and benefit of such products. This transparency underpins the consumer protection nature of the CCCF Act and benefits both the consumers and competition within the industry.”
“Where a creditor on-charges customers a third party fee this must be charged without any additional mark up. Where a creditor arranges credit related insurance any commission charged in relation to this product must be reasonable. The level of refunds agreed in this settlement should send a very strong signal to the credit industry that if a creditor breaches the CCCF Act by charging unreasonable credit fees the Commission will take enforcement action,” said Ms Rebstock.
“The finance company has been cooperative with the Commission since the commencement of this investigation and has sought to refund those affected debtors at the earliest opportunity,” Ms Rebstock confirmed.