$590K to be refunded to borrowers
Overcharged customers to get refunds from finance companies.
Car finance lender Auto Finance Direct and Pacific Loans are refunding overcharged customers, following a Commerce Commission investigation into the lenders’ fees.
Auto Finance Direct is refunding $460,000 after admitting to charging unreasonable fees to more than 5000 customers between April 2015 and August 2018. The fees included:
- an establishment fee of more than $190
- an early settlement fee of more than $65
- a variation fee of more than $55.
Pacific Loans agreed to refund $134,779.23 to 82 borrowers after charging interest and fees it wasn’t entitled to collect. The company admitted to breaching the Fair Trading Act by misleading customers about its right to impose these charges.
Both companies have signed settlements with the commission, agreeing to refund customers and change their practices.
Commissioner Anna Rawlings said it’s been monitoring credit fees charged by lenders to assess whether they comply with the law.
The commission is responsible for enforcing the Credit Contracts and Consumer Finance Act, which prohibits lenders charging unreasonable fees.
In May 2016, the Supreme Court ruled credit fees should only cover costs closely related to the loan and should not be used to recover general business costs or to generate profits – that’s what interest is for.