Lender cops $200k fine
Eagle MAN Group Ltd has been ordered to pay a pecuniary penalty of $200,000 for providing high-cost loans in breach of multiple aspects of the Credit Contracts and Consumer Finance Act (CCCFA).
It was the Commerce Commission’s first case enforcing rules applying to high-cost lenders.
Deputy chair Anne Callinan, pictured, says it was important for the regulator to take the case on because of the significant harm that can be caused to consumers having high-cost loans.
It’s also important to remind lenders and borrowers there are extra requirements finance providers must meet for such loans.
Loans that have an interest rate of more than 50 per cent – and in Eagle MAN’s case in excess of 100 per cent – can push borrowers into debt spirals that are difficult to get out of, causing harm to consumers and their families.
“The majority of loans Eagle MAN issued were to consumers who were financially strained, recent immigrants or on temporary work visas,” says Callinan.
“They were likely facing significant need, which could have made them more vulnerable to high-cost lenders. Eagle MAN should have had compliance processes in place to make sure these consumers were treated fairly.
“In some instances, Eagle MAN charged an interest rate of 182.5 per cent per annum, on top of credit and default fees. This could saddle consumers with significant debt that’s more than the amount borrowed.”
Under the CCCFA, lenders that offer loans with an interest rate of more than 50 per cent are categorised as “high-cost lenders” and must meet specific requirements.
Eagle MAN didn’t meet these requirements when it issued loans with interest rates and fees that exceeded the amount of the first advance and gave repeat high-cost loans to borrowers. In addition, it failed to disclose key information to people.
Christchurch High Court agreed with the Commerce Commission that it was likely breaches of the CCCFA occurred across Eagle MAN’s high-cost loan book between May 2020 and August 2022.
October 11’s decision was made based on a sample of high-cost loans analysed by the regulator in which over half breached the CCCFA.
“This court ruling is significant,” says Callinan. “It shows these breaches were systemic. The penalty reflects the overarching scope and scale of the high-cost loan breaches – 59 per cent of consumers faced breaches, which is unacceptable.”
