Commerce Commission warns Hamilton finance firm
A Hamilton finance company has been warned by the Commerce Commission after it likely breached lending rules.
The Commission believes Hamilton-based WeCare Finance Limited fell foul of lender responsibility principles “by failing to make reasonable inquiries about whether a borrower could repay a loan and in unreasonably repossessing a motor vehicle”.
“We think it’s important to bring the facts of this case to the attention of other lenders because, in our view, WeCare Finance did not … make reasonable inquiries about the borrower’s ability to afford the loan,” Commission chairwoman Anna Rawlings says.
In the commission’s view, WeCare Finance failed to exercise the care, diligence and skill of a responsible lender before entering into a loan agreement; make reasonable inquiries before entering into the loan agreement, so as to be satisfied the borrower would make the repayments without suffering substantial hardship; and treat the borrower reasonably and in an ethical manner when it repossessed her vehicle.
The commission reveals that in October 2017, the finance company lent $5,490 to a Hamilton borrower to buy a car. The total amount she had to repay, including fees, interest and insurance was $10,495.68 over three years. Following a complaint from a financial mentor, the commission opened an investigation in August 2018.
The borrower’s application stated she and her partner had a total income of about $600 per week and total expenses of $150. A bank statement provided to WeCare Finance showed expenses that were, in fact, about the same as the joint income.
After missing two payments in early 2018, the borrower arranged with WeCare Finance to reduce her repayments. At the time the company noted the borrower and her partner had separated. A further repayment was missed and the borrower entered into a no asset procedure (NAP). WeCare Finance repossessed the car on the same day it was told of the NAP without notifying the borrower on the basis the car was “at risk”.
Rawlings, pictured above, says the company considered the borrower’s income and her then-partner’s income but he was not a party to the loan and the commission feels “WeCare should not have taken his income into account”.
“WeCare also failed to make reasonable inquiries into the borrower’s expenses given that information contained in the bank statements was not consistent with the information provided by the borrower,” she adds.
“During our investigation WeCare accepted that it did not have grounds to repossess the vehicle on an ‘at risk’ basis simply because the borrower entered the NAP. The vehicle was not about to be destroyed, damaged or disposed of.
“In our view WeCare did not treat the borrower reasonably or ethically when it arrived at her home, without prior notice, and repossessed her vehicle without the right to do so.”
WeCare Finance told the commission a staff member had acted outside the scope of its internal practice guidelines and it has ow revised its consumer lending and repossession policies and addressed the borrower’s complaint directly with her.
