Debt group owes $1.4m

A debt collection group will have to pay back more than $1.4 million to hundreds of customers who were wrongly charged, following an investigation by the Commerce Commission.

Receivables Management will have to credit the amount to about 1700 customers who were wrongly charged interest, costs and fees on loans after their goods had been repossessed and sold.

The commission’s competition general manager, Antonia Horrocks, said the group co-operated throughout the investigation.

‘‘When borrowers are in default, lenders essentially have a choice between issuing proceedings and continuing to charge interest and fees or repossessing secured goods which freezes the amount owed under the loan. They can’t repossess and continue to charge interest and fees,’’ she said.

Receivables Management has agreed to refund all affected borrowers by the end of March.

If customers are owed a cash refund, they will be entitled to an additional 5 per cent of the interest and fees charged for not having had use of the money.

Receivables Management director Ross Fleming said if the company could not find the customers, it would hold on to the money until the customers got in contact with them. Unclaimed money will then be transferred to the Inland Revenue Department.

The commission found the group breached the Fair Trading Act by incorrectly claiming it had the right to charge interest, costs and fees to loan balances after the repossession and sale of consumer goods. This conduct was prohibited by the now repealed Credit Act 1997 and is now unlawful under the Credit Contracts and Consumer Finance Act 2003.

The Receivables Management group includes Receivables Management, Southern Receivables, Allied Recoveries, and RJK Receivables.