High-cost, short-term lender Pretty Penny has agreed to write off all outstanding loan balances after reaching a settlement with the Commerce Commission.
In a statement, the commission said Quadsaa Pty, trading as Pretty Penny, had signed a court-enforceable undertaking that it would no longer advertise for, invite or enter into consumer loans in New Zealand and would not provide any information about borrowers to third parties, unless required to by law.
The company had also agreed to write off all outstanding loan balances and refund the cost of borrowing to 21 borrowers named in court action filed by the commission in August 2019.
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Commerce Commission chair Anna Rawlings said it filed proceedings against Pretty Penny because it believed the company had breached a number of the responsible lending provisions of consumer credit law.
"That conduct has now ceased because Pretty Penny will no longer do business here in New Zealand, and this agreement means outstanding balances owed to Pretty Penny should now no longer be payable."
As part of the agreement, the commission will discontinue its proceedings against Pretty Penny.
The proceedings alleged the lender breached the responsibility principles of the Credit Contracts and Consumer Finance Act 2003 between February 2017 and June 2019.
During that period, Pretty Penny offered loans of between $50 and $550 for terms of between one and 92 days with an annual interest rate of 365 per cent or 1 per cent per day with interesting compounding daily.
The commission alleged Pretty Penny failed to exercise the care, diligence and skill of a responsible lender, as required by the lender responsibility principles, including that it failed to ensure its loan agreements were not oppressive.
As of June 1 changes have been made to the law to cap the interest rates for high-cost, short-term lenders.
Interest and fees charged on a high-cost loan are now capped at 100 per cent of the amount first advanced with a daily rate cap of 0.8 per cent.
Lenders are also restricted from making high-cost loans to some repeat borrowers and have extra disclosure obligations.
Lenders who entered into contracts from June 6, 2015 were required to comply with responsible lending principles which include making reasonable inquiries, before entering the agreement, to be satisfied the borrower was likely be able to make repayments without suffering substantial hardship.