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The Serious Fraud Office has been called in to investigate the collapse of a finance company which sold itself as a budgeting service.
It's likely that many small clients who used Debt Relief NZ to help pay their bills may be even worse off, after a series of
linked companies were this week put also into liquidation.
Debt Relief NZ, which managed money for 147 cash-strapped clients from its offices in Paraparaumu, was first placed in liquidation in November last year, owing $1.7 million.
The business - which didn't have a trust account - offered relief from hounding creditors by negotiating low repayments with companies such as Telecom and Mercury Energy.
PricewaterhouseCoopers liquidator John Fisk said he had been appointed interim liquidator for other companies connected with Debt Relief: Old Detroit Motors, First Plus Finance Limited and First Plus Ltd.
PricewaterhouseCoopers had also been appointed receiver to 0800 New Phone Limited and Nevada Management Ltd.
Fisk said a complaint had been filed with the Serious Fraud Office.
"We put together the evidence that relates to our concerns, report it through to them and then they tell us whether it'll be taken on for investigation. In this case they've said they're going to take it on."
Fisk said the claims relate to "misappropriation of funds and other concerns".
Debt Relief's sole director, Keith Ross Mackie, who says he has previously worked in investment for two major banks, was not answering his phone on Friday, but spoke to the Herald on Sunday earlier this month.
He explained that Debt Relief NZ charged customers $25 per week to receive all of their income. It would then pay bills on their behalf. Trouble arrived, Mackie said, when the company continued paying customers' debts even when they stopped handing over wages and benefits to Debt Relief. He said the company had just $700 in the bank when the liquidators came in.
He insisted Debt Relief "wasn't my company", despite being named as the sole director on Companies Office records. He said a woman named Belinda was behind the collapsed business, but was unsure of her surname or phone number. "I was more an admin manager than a director."
He said he had a new job as "admin manager" for Old Detroit Motors and denied being the owner of this company, though company records again have him registered as the sole shareholder and director.
Fisk said that it appeared Old Detroit Motors had been advancing people money to buy cars. It was "providing finance to people and leasing vehicles to people who couldn't get vehicles any other way".
In the initial liquidation documents for Debt Relief, Fisk said that it was "unlikely there will be a return to unsecured creditors, and if so, it is not anticipated to exceed 20 cents in the dollar."
Fisk said that people who lost money included financiers and people who had put their "budgetary funds through Debt Relief".
The head of the Federation of Family Budgeting Services, Raewyn Fox, said that Debt Relief NZ "was more a finance company than a budgeting service". The federation, which helps 30,000 families - and of which Debt Relief NZ was not a member - welcomed further investigation into the matter. Companies claiming to be budget advisers but which were really finance companies were growing, she said.
The Commerce Commission is not actively investigating Debt Relief NZ, said spokeswoman Kate Camp.
Writing on the wall for dozens of small finance companies
The risky used-car finance market and the potential for fraudulent lending has been a big issue surrounding New Zealand finance companies after last year's collapse of National Finance 2000, Provincial Finance and Western Bay Finance.
Accountancy firm KPMG, in its annual survey of finance companies, said that tougher new regulations and the end of a sustained period of economic growth were likely to sound the death knell for dozens of small finance companies.
"Falling discretionary spending had affected consumer finance, while high oil prices for much of last year impacted on motor vehicle finance," the report said.
The firm's financial services deputy chairman Godfrey Boyce said in the report that the failure of the three companies "drove home the risks being taken by some finance companies, particularly those financing second-hand motor vehicles".
He said "the key element" in the failures was the credit processes used to originate the lending and ultimately collect the debt.
"The collapses emphasise the importance of having the appropriate management and governance processes in place to manage and control a fast-growing financial institution," he said. A regulatory framework proposed by the Ministry of Economic Development last year could have a huge effect on the industry.
The ministry has proposed two tiers of regulation. One would be for "approved deposit takers", who would be subject to Reserve Bank supervision, tough capital adequacy requirements and mandatory credit ratings.
The other tier would be companies which opted against becoming approved deposit takers.
They would face minimum capital requirements, mandatory credit ratings and close supervision.
