Lender to refund customers
High-cost lender Moola has agreed to refund the interest and fees paid by 50 customers after admitting it failed to comply with the Credit Contracts and Consumer Finance Act’s lender responsibility principles.
The Christchurch-based company, which provides high-cost, short-term loans of up to $5,000 through the Moola.co.nz and needcashtoday.co.nz websites, will make the repayments as part of a settlement with the Commerce Commission.
Moola has admitted, in relation to 50 loans it issued between June 6, 2015, and November 30, 2017, that it failed to make reasonable inquiries to satisfy itself that it was likely the deals met borrowers’ requirements and objectives.
It also failed to sufficiently investigate whether borrowers would be able to make repayments without suffering substantial hardship.
The commission says, for example, Moola required borrowers to choose from a finite list of options when stating the reason for taking out a loan, including “other”.
The company did not follow up to require additional information from those who selected “other”, and applicants had no ability to provide a full description of the reason for the loan.
Moola did not consider the purpose of the borrowing when determining whether to advance the loan for some consumers. Some people seeking a top loan were not required to state the purpose for their loan at all.
The online lender also relied solely on bank transaction data provided by prospective borrowers to determine whether they were likely to make loan repayments without undue difficulty.
The commission says Moola used income ratios to assess affordability, rather than assessments of a borrower’s actual expenses against their income. Borrowers were not asked to specify their actual expenditure and additional checks, which may have provided additional relevant information, were not carried out.
In addition, Moola admitted it failed to exercise the care, diligence, and skill of a responsible lender in advertisements for high-cost loans when it engaged in direct advertising offering additional loans, and that its methods of contacting defaulting borrowers breached its obligations to treat borrowers reasonably and in an ethical manner.
Anna Rawlings, commission chairwoman, says: “Moola failed in its responsibilities to help ensure that loans meet borrowers’ needs and can be repaid without substantial hardship.
“These are important borrower protections and Moola has undertaken to implement systems, processes, policies and training to help it to meet its responsible lending obligations in future.”
Rawlings, pictured, notes that from December 1, 2021, new regulations will require lenders to make additional, specific inquiries about borrowers’ needs and objectives, as well as their income and expenses to help ensure that loans are suitable and affordable.
“We urge all lenders to familiarise themselves with those requirements and ensure that they have processes in place to assist them to comply,” she adds.
To read the complete settlement agreement between the commission and Moola, together with the undertakings, click here.
