Finance company in $2.8m settlement
A high-cost, short-term lender faces having to credit or refund $2.8 million to borrowers after reaching a settlement with the Commerce Commission.
Moola.co.nz, which trades as Moola, has agreed to the deal after acknowledging it had charged unreasonable credit and default fees.
The company offers loans to borrowers via its website and includes vehicle finance among its products.
Prior to the introduction of a daily rate of charge cap in June 2020, it offered loans with annual interest rates as high as 620.5 per cent.
The commission started investigating Moola after receiving complaints, including from a Christchurch budget advisory service.
In September 2017, the District Court also raised concerns about the level of Moola’s fees and invited the commission to intervene in debt recovery proceedings taken by Moola.
As a result of the investigation, the commission considers that between February 2016 and July 2017, Moola is likely to have charged unreasonable credit and default fees, breaching the Credit Contracts and Consumer Finance Act 2003 (CCCFA).
The commission says Moola charged default fees of $60 where the reasonable fee as calculated by the commission was from $10.24 to $15.66, depending on when the fee was charged.
During the period of investigation, Moola also charged establishment fees of $150 or $350 depending on the term of the loan, whereas the commission says it should have been either $4.47 or $5.48.
Processing fees of $50 were also levied by the company, but the commission calculates the reasonable fee was $10.86 or $12.25.
Anna Rawlings, chairwoman of the commission, says: “We consider that during the relevant period, Moola’s default fee, establishment fee and processing fee recovered costs that were not closely related to the matter for which the fees were being charged, as required by the CCCFA.
“Moola acknowledges our view and has undertaken to credit or refund affected customers the difference between the fee charged and the fee we calculated was a reasonable fee.
“Fees must recover costs that are ‘relevant and closely connected to the activity for which the fee is charged’. The commission’s view is that Moola’s fees recovered more than those costs.”.
The commission says Moola co-operated during the investigation and reduced its fees prior to and again during the process.
Because of business disruptions caused by the Covid-19 pandemic, Moola was given six months by the commission to calculate the refunds it owed customers before the public was notified of the settlement.
Rawlings, pictured, says affected customers will be credited or refunded by Moola within the next 12 months.
Anyone who borrowed from Moola between February 2016 and July 2017 can check the company’s website for more information about its agreement with the commission.
Separately, the commission has taken High Court proceedings against Moola alleging irresponsible lending. That matter is unaffected by the settlement relating to unreasonable fees.