Vehicle finance provider warned
The Commerce Commission has issued a warning to Dealer Finance Ltd (DFL), a Christchurch-based motor-vehicle finance lender, after an investigation into its compliance with obligations under the lender responsibility principles under the Credit Contracts and Consumer Finance Act (CCCFA).
The warning relates to three loans given to borrowers between September and December 2015 by DFL’s agent Nigel Thompson Motor Company Ltd (NTMC), which is now in liquidation,” says the commission.
“The lender responsibility principles require lenders to ensure they make reasonable inquiries into whether a borrower can make loan repayments without suffering substantial hardship,” says commissioner Anna Rawlings. “The commission’s concern is that DFL, through its agent NTMC, failed to do that.
DFL provides vehicle finance through 20 Christchurch-based car dealers. Each trader holds a five per cent share of the company and acts as agent for DFL in entering into loans using documents supplied by DFL.
The commission investigated three complaints about loans issued by DFL via NTMC:
• A beneficiary was given a loan despite telling NTMC she had personal debts of $30,000.
• Another beneficiary was given a loan despite having only $1.65 in her bank account at the time of entering into the agreement.
• NTMC staff approved a loan to a sickness beneficiary without asking for any documents other than her passport and driver’s licence.
Rawlings says: “In all these cases, the commission is concerned that either DFL obtained insufficient information about the borrower’s financial affairs, or it didn’t sufficiently take into account other relevant information. In each case the borrower’s financial difficulties appeared to be compounded by the loans.
“While NTMC was DFL’s agent in all three cases, in our view NTMC did not make sufficient enquiries about the borrowers’ ability to repay the loan to ensure that DFL complied with its obligations. It’s important all lenders using agents to complete their loan documents have procedures in place to ensure their dealer agents comply with the lender responsibility principles.”
DFL has advised the commission it now ensures its dealers satisfy a checklist of reasonable inquiries before approving finance. It now also reserves the right to undo agreements made by dealers on review of documentation. “We acknowledge DFL had begun developing its procedures before our investigation and that it has settled the debt of two borrowers,” adds Rawlings.