Finance firms fined $720,000 on 125 charges under Fair Trading Act

Finance companies Budget Loans and Evolution Finance, together Budget Loans, have been fined $720,000 in the Auckland District Court. Photo / Nick Reed

Finance companies Budget Loans and Evolution Finance, together Budget Loans, have been fined $720,000 in the Auckland District Court on 125 charges under the Fair Trading Act, says the Commerce Commission.

They were also ordered to pay $53,000 emotional harm reparations to nine victims, and approximately $38,000 in refunds and credits to borrowers.

Over 6 years from 2009 until 2014 Budget Loans misrepresented its right to repossess goods, and recover interest and costs from borrowers. It also misrepresented amounts borrowers were required to pay under attachment orders and made misrepresentations about the benefits of refinancing existing loans, the commission said.

The commission's general counsel, competition and consumer Mary-Anne Borrowdale said: "The financial and emotional distress caused by this conduct to borrowers and their families should not be underestimated."

Eighty-three of the charges were for misrepresentations around repossession, including where there was no valid right to repossess a secured item of property, such as a vehicle or household goods, or where there was no outstanding loan balance to be paid.

The commission said that in sentencing, Judge David Sharp said it was "cynical and deliberate" offending. He said the repossessions were "reprehensible" and were "used as a direct means of coercion".

Twenty-nine charges were for adding interest and costs to a loan balance after repossession, when that is not allowed under the Credit Repossession Act.

"One borrower declared herself bankrupt when told her loan had ballooned from about $9,000 to $57,000. In fact she had less than $2,500 to pay at that time," Borrowdale said.

Ten charges were for misrepresentations about adding interest to loans, beyond amounts in attachment orders issued by the courts. The final three charges were for misrepresentations about the benefits of refinancing with Budget Loans.

"These were particularly serious breaches of the Fair Trading Act," Borrowdale said.

"Lenders must not misrepresent their rights under loan contracts and they must act within the law. They cannot require borrowers to pay amounts and extra costs they do not owe, as happened time and time again with Budget Loans."

During the relevant period the directors of Budget Loans were Allan Hawkins and his son Wayne Hawkins.

"The commission is seeking banning orders against both men, following this sentencing and the earlier conviction of Budget Loans on 34 charges under the Fair Trading Act in 2010," Borrowdale said. "As our application is before the courts the commission will make no further comment on it at this time."