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Alexander Robertson/Stuff
The Commerce Commission says many lenders who charged more than 50% in interest have either exited the market, or dropped their lending rates.
The Commerce Commission wants fines imposed on a lender it claims broke lending laws which banned it from charging fees and interest adding up to more than 100% of the amount it lent borrowers.
The commission said it had begun legal proceedings at the High Court against Christchurch-based Eagle Man Group, which trades as EagleMan Loans.
As well as breaching the fee and interest cap, the commission alleged EagleMan Loans also failed to provide key information to some borrowers.
The alleged breaches of the Credit Contracts and Consumer Finance Act (CCCFA) by EagleMan happened on loans made between 2015 and 2022, the commission said.
This case was launched following a review of the high-cost lending market, in which the commission looked at compliance among lenders with high-cost lending rules introduced in 2020.
Those rules included limits on how much lenders could earn on loans with an interest rate of 50% or more a year. They were introduced in mid-2020 in an attempt to reduce the damage payday lending was doing.
As well as taking action against EagleMan, the commission also issued warning letters to four other lenders for likely breaches of the CCCFA: Hippo Holdings from Auckland, Acorn Finance from Wellington, Tiny Loans from Auckland, and Moola from Christchurch.
Louise Unger, the commission’s general manager for credit, said the review of high-cost lenders found the 2020 law changes forced some lenders to exit the market, while others simply cut their loan rates to below 50%.
Some had been charging as much as 800% interest, she said.
“We have also successfully secured more than $70,000 in remediation to affected borrowers from lenders who were investigated,” Unger said.
The commission described EagleMan as a “former” high-cost lender.
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Christchurch lender EagleMan Loans is being taken to court by the Commerce Commission.
EagleMan’s website shows it now charged 49% for its loans, along with $250 application fees, $10 monthly account fees, and $3 direct debit fees.
Unger said: “High-cost lenders charge at least 50% in interest, and so the nature of the loans are often to satisfy a short-term, urgent need for finance.
“Many borrowers who sign up may therefore be in a vulnerable position when making decisions to take out the loan.”
She said the restrictions on high-cost lenders were in place to provide additional protections for those borrowers.
Unger said the commission considered EagleMan did not meet all the restrictions, and that its conduct had the potential to cause significant harm or financial detriment.
Unger said the case was the first legal action filed under the new rules, and was also the first time the commission had sought pecuniary penalties under the CCCFA since those penalties were introduced in December 2019.
EagleMan is registered to make loans on the Financial Service Providers Register.
The Companies Office register shows its sole director is Noli Alea.
On its website, EagleMan calls itself a responsible loan provider “seriously committed in complying with Credit Contracts and Consumer Finance Act 2003 of New Zealand”.
“If you believe that you are in a bad debt situation and worried that you will not be able to afford the required repayment and that taking out a loan from us will only worsen your financial situation, then please do not apply and do not take out or accept a loan from us.”
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