Lender to pay $1.4m in compo
Online lender Rapid Loans NZ has agreed to compensate borrowers about $1.4 million following a Commerce Commission investigation into unreasonable fees.
The commission’s investigation revealed Rapid Loans had charged unreasonable establishment, monthly administration or default fees on more than 6000 loans between July 1, 2013, and June 30, 2015.
Rapid Loans will either credit existing loans of affected borrowers or provide cash refunds to those who had already paid their loans off.
The total amount to be paid includes an added 5 per cent to reflect the borrowers’ lost opportunity to use the money.
Commissioner Anna Rawlings said the Rapid Loans investigation was triggered by a complaint from a budget adviser concerned about the high fees being applied.
‘‘Lenders need to make sure that their credit fees are reasonable as required by the Credit Contracts and Consumer Finance Act,’’ Rawlings said.
‘‘Credit fees should only cover costs that are closely related to the particular loan transaction, as was reinforced in the Supreme Court last year. In this case, the fees were more than Rapid Loans’ actual reasonable costs in setting up a loan, administering it or in dealing with a borrower’s default.
‘‘We recognise that Rapid Loans did not set out to breach the act, but its incorrect calculations meant a number of its clients paid more than they should have.’’
Under the settlement agreement, Rapid Loans is required to make its best efforts to contact every affected borrower that it calculates is owed more than $20 in order to refund them and report back to the commission.