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Loans not so ‘super’ after all

Regulator dishes out official warning to former providers of high-cost finance.
Posted on 07 December, 2020
Loans not so ‘super’ after all

The Commerce Commission has issued a warning to Superloans Napier Ltd and Superloans Porirua Ltd that they are likely to have failed to comply with the Credit Contracts and Consumer Finance Act (CCCFA).

An investigation into the Superloans Group, including its operations in Porirua and Napier, was opened after the regulator received complaints.

“Our investigation identified several borrowers who were provided with high-cost ‘express’ loans on a regular and ongoing basis,” says commission chairwoman Anna Rawlings, pictured. “In one case, a borrower had 19 loans in a 12-month period.”

The CCCFA requires lenders – before entering into agreements – to make reasonable inquiries with borrowers so they are satisfied loans meet the consumer’s requirements and objectives, and to exercise the care, diligence and skill of a responsible lender.

“Our investigation found Superloans promoted and allowed its loans to be used on a regular and long-term basis, and encouraged longer term and regular borrowing through the use of text and email messaging to borrowers,” adds Rawlings. “These text messages did not contain a risk warning.

“There was also limited evidence to indicate a borrower’s previous borrowing or stated purpose for the loan was discussed or taken into account when assessing the suitability of the loan. Superloans Group’s guidelines did not contain any guidance on how staff should comply with their responsibilities in this area.

“Responsible lending is an area of focus for the commission. We urge lenders to make sure they understand their responsible lending obligations and have internal processes in place to ensure they meet those obligations.”

The lender responsibility principles states finance providers entering into consumer credit contracts after June 6, 2015, must comply with the responsible lending obligations principles of the CCCFA.

They must make reasonable inquiries to be satisfied it’s likely the borrower will make repayments without suffering substantial hardship, and to exercise the care, skill and diligence of a responsible lender.

From June 1 this year, high-cost lending to consumers became subject to specific restrictions that do not apply to other forms of lending.

A key restriction is interest and fees charged on high-cost loans being capped at 100 per cent of the amount first advanced.

Others are the rate of charge – excluding default fees – on a high-cost loan being limited to 0.8 per cent daily and lenders being restricted from making high-cost loans to some repeat borrowers.