Finance companies Budget Loans and Evolution Finance, run by former 1980s corporate high-flyer Allan Hawkins, have been found guilty of 106 charges of breaching the Fair Trading Act for misleading 21 borrowers while enforcing loan contracts.
The Commerce Commission filed proceedings against the companies in December 2014. It said the companies had misled consumers about their rights by repossessing or threatening to repossess property they didn't have a right to repossess, unlawfully adding interest and costs to loan balances after property had been repossessed and sold, and telling debtors that they had to make bigger loan repayments than had been ordered by the court or had a shorter time to remedy a loan default before their property was repossessed.
The commission filed 125 charges against the two companies, but the Auckland District Court ruled this month that 19 of the charges should be dismissed. The commission said it intends to seek leave to appeal the ruling and have the 19 charges reinstated. The charges were dismissed due to "lack of certainty about the circumstances in which a lender could continue to charge interest and costs after repossessing and selling consumer goods under a continuing security agreement," it said.
"The guilty verdict is pleasing and the public can be assured that tackling unlawful repossession activities remains a priority for us in our work enforcing credit and consumer laws," Commerce Commission chair Mark Berry said. "We are committed to ensuring that lenders and other parties comply with credit contract laws throughout the full life of a loan - including when the borrower has fallen into default."
The finance companies were issued with a 'stop now' notice by the regulator in November 2013 while it conducted its investigation, and in 2010 Budget Loans admitted 34 charges of breaching the Fair Trading Act by charging interest and fees after it had repossessed and sold items of security. The lender agreed to make substantial repayments and was fined $30,750.
The loans largely originated from a number of failed finance companies including National Finance, Western Bay Finance and Equality Finance, which Budget Loans and Evolution Finance purchased when they were subsidiaries of former NZAX-listed company Cynotech Holdings.
Hawkins, the former head of Equiticorp, who was jailed in the 1990s for his role in the so-called H-fee scheme, took control of Cynotech in 2010 and pulled his financial support in 2013, leading to the company's liquidation and delisting.
He and Wayne Hawkins are directors of the two finance companies.