A finance company was blocked from offering loans to the public after it failed to pay out an award to a couple who won a claim against it through a dispute resolution service.

But Stuart Smith, the director of Rural Property Finance, says he didn't pay because he disagreed with the ruling by Financial Services Complaints and has laid a complaint with commerce minister Kris Faafoi over the way the dispute resolution scheme acted.

Charlene and Darren (who don't want their last name used) complained to Financial Services Complaints (FSC) in June last year after they refinanced two loans with Rural Property Finance only to find the settlement amount was higher than expected, forcing them to delay the deal.

The settlement went through days later but in the meantime Rural Property Finance charged penalty fees and interest to the couple.


In October Financial Services Complaints issued a decision against Rural Property Finance and ordered the company to pay the couple $6,662.

In her decision Susan Taylor, chief executive of FSC, said the couple were unable to settle their loans on June 1, 2018, due to "inaccuracies" in Rural Property Finance's settlement statements and it was "unreasonable" for the company to charge default interest and fees for the period between June 1 and 6.

Taylor found the finance company overcharged the couple $5144.47 when they settled the loan on June 6 and ordered the company pay that back plus $1000 for the stress and inconvenience caused as well as $517.50 to cover legal fees.

The finance company paid out $1927.86 leaving more than $4700 owing which the couple are now chasing through the Disputes Tribunal.

Financial Services Complaints warned the company to pay up in full. Rulings by dispute resolution services can not be contested by members.

But Rural Property Finance did not do so and the dispute scheme took the unusual step of terminating the company's membership and having it removed from the Financial Service Providers Register.

All finance companies which offer services to the public have to be on the register and be a member of a dispute resolution service, to offer finance to the public or if they have an existing loan book.

The company was removed from the register on December 12.

Taylor also complained to the Commerce Commission over concerns the finance company may be continuing to offer financial services despite it no longer being legally allowed to.

A commission spokesman said it received information late last year raising concerns about Rural Property Finance.

"As part of our usual assessment process we undertook some initial enquiries and found the website is no longer active and we did not find evidence of the company currently offering consumer finance."

But the spokesman said if anyone had entered into a consumer finance contract with Rural Property Finance after it was deregistered they should contact the commission.

Taylor yesterday said it was an unusual situation.

"We have never had anyone that has allowed themselves to be deregistered for failing to pay an award."

Finance companies can not join another dispute resolution scheme while they have an award outstanding.

Stuart Smith, who is the sole director of Rural Property Finance and co-owns the business with Robyn Simcock and Scott Massie said it disputed the finding of Financial Services Complaints and believed it was inconsistent with the loan agreement it had with the couple.

"We have written to the minister and laid a complaint about the inaccuracy of their conclusion and FSCL's [Financial Services Complaints Ltd's] decision to stray from the facts of the case."

A spokeswoman for commerce minister Kris Faafoi said it did not have a record of a complaint being made by Rural Property Finance about Financial Services Complaints Limited.

Smith was critical of Financial Services Complaints handling of the case.

But Taylor said it had carried out a thorough investigation of the complaint and both sides had ample time to present with submissions.

Smith said it made a voluntary payment of $1927.26 to the borrowers as it was able to move funds received from one of their loans to another to minimise the penalty costs.

"This was offered well before FSCL had reached their conclusion."

Smith said the loans to the couple were not its usual line of lending and it had only done it as a favour for a broker who was trying to avoid a mortgagee sale by the BNZ on the couple's property.

He said Rural Property Finance was set up for a specific dairy project in 2012 and the project was completed last year. The company had not traded since mid last year.

"It has no loans. There was a single web page that was cancelled in August last year. RPF [Rural Property Finance] has been a holder of mortgage securities – and now these too have all gone," Smith said.

Smith said in 19 years of lending the complaint was the first he had received and he hoped it would be the last.

"Our mistake was lending to these people. In 19 years of lending this is the first complaint received and hopefully the last. Most of our business is from repeat commercial customers."

Smith is also a director of Norfolk Mortgage Management the investment manager for the Norfolk Mortgage Trust, which is registered on the Financial Service Providers Register and licensed by the Financial Markets Authority. It remains able to lend to the public.

Smith, alongside Robyn Simcock and Scott Massie owns 24.14 per cent of Norfolk Mortgage Management - the largest shareholding in the company.

Norfolk Mortgage Trust is a unit trust which invests in first and second mortgages over residential, commercial and rural property and sell its units to the public as an investment.

A spokeswoman for the Companies Office which oversees the FSPR said Rural Property Finance was deregistered on the grounds that it was no longer a member of a dispute resolution scheme.

"According to the FSPR, Norfolk Mortgage Management is still a member of a dispute resolution scheme (Financial Services Complaints).

"The registrar is not aware any of the grounds in section 18 apply to this company so as to initiate deregistration from the FSPR at this stage."

The register is designed to allow regulators and the public to know who is providing financial services in New Zealand but registration on it is not an official approval of an individual, business or organisation.

To be registered a provider and its key personnel must meet certain minimum requirements, including not be undischarged bankrupts or having convictions of certain dishonesty offences.

An FMA spokesman said one of the requirements of the licence held by Norfolk Mortgage Management was that the directors were fit and proper persons.

"Mr Smith is a director of Norfolk Mortgage Management, and is subject to the fit and proper person test. We are looking into this issue."