Budget Loans Ltd has been pinged for misrepresenting its rights and charging fees to debtors in a loan book it purchased.Budget Loans pleaded guilty to 34 charges of breaching the Fair Trading Act in the Auckland District Court today, according to the Com
Budget Loans Ltd has been pinged for misrepresenting its rights and charging fees to debtors in a loan book it purchased.
Budget Loans pleaded guilty to 34 charges of breaching the Fair Trading Act in the Auckland District Court today, according to the Commerce Commission. It was fined $30,750.
When Budget Loans took over National Finance 2000 Ltd's loan book in 2006, it sent a welcome letter to National Finance's debtors advising them that their loan was now owned by Budget Loans. Debtors who received the welcome letter were charged a $15 fee.
The commission said creditors cannot charge fees that have not been disclosed under the Credit Contracts and Consumer Finance Act.
"The $15 `welcome letter' fee was not disclosed before it was charged and Budget Loans therefore misled debtors by representing that it was entitled to charge the fee, when it was not," said Graham Gill, the commission's enforcement manager for Auckland.
Budget Loans also misrepresented, in contracts, settlement statements, notices and letters sent to some debtors, that it was entitled to continue to charge interest and fees after it had repossessed and sold consumer goods and applied the proceeds to the outstanding balance of the debt.
The Credit (Repossession) Act 1997 allows creditors to only recover the balance still outstanding and prohibits further interest and fees from being charged after the sale of a security item.
Budget Loans also misled consumers as to its rights under the Personal Property Securities Act 1999 by claiming it had the right to repossess all personal properties of debtors.
Budget Loans has reversed or refunded over $400,000 of the approximately $500,000 of overcharged interest and fees. The company has agreed to reverse, or refund, the remainder of the overcharged interest and fees. The court recognised this reparation in setting a fine for the offending.
During the commission's investigation Budget Loans also voluntarily reversed or refunded an additional $571,000 to its debtors in relation to credit fees that were not the subject of the current charges.
