Case could ‘spell end’ of industry
Online loan service Harmoney has warned a legal challenge by the country’s competition watchdog could spell the end of the fastgrowing peer-to-peer lending industry.
Harmoney operates a website that lets people directly lend money to other people who have requested personal loans, providing an alternative to traditional bank lending. Trade Me and Heartland Bank are minority shareholders in the venture.
But the Commerce Commission has filed civil proceedings at Auckland High Court, asking it to rule whether fees charged by Harmoney to borrowers fall under the auspices of the Credit Contract and Consumer Finance Act.
Harmoney chief executive Neil Roberts said an unfavourable ruling could ‘‘spell the end of the industry in its current form’’.
‘‘If the court agrees with the commission’s view that platform fees are a credit fee, platform providers such as Harmoney will only be allowed to recover costs from transactions. This would make it extremely difficult for peer-to-peer platform providers to create a sustainable business,’’ Roberts said.
Prior to December, Harmoney charged borrowers a fee of between 2 and 6 per cent of the value of their loan, depending on their perceived credit risk, with a minimum fee of $300.
After discussions with the commission that was changed to a flatrate fee of $375. Lenders are also charged fees.
Harmoney chairman David Flacks said the action by the commission was ‘‘disappointing’’ and would affect an industry that Roberts said had brought competition to a market previously dominated by ‘‘traditional lenders’’.
‘‘The peer-to-peer industry is new to New Zealand and is growing fast both in New Zealand and globally,’’ Flacks said. ’’It offers benefits both to borrowers and lenders over traditional lending options.’’
Roberts said the Financial Markets Authority and the Commerce Commission had been aware of Harmoney’s business model before it was granted a peerto-peer lending licence in 2014.
‘‘We documented the business model in detail following extensive legal advice and working with all stakeholders during the licensing process,’’ he said.
Roberts said previously that Harmoney was keen to extend its service from personal loans to small-business lending. But it would not be making a concerted push into that market ‘‘until the regulatory uncertainty around peer-to-peer lending in New Zealand is resolved’’, he said.
The commission took separate legal action against Harmoney this month, saying letters sent by the company to prospective borrowers breached the Fair Trading Act.