Lessons from bad lending

ROB STOCK

MONEY MATTERS

Another loan company has given us an object lesson in trusting lenders.

Pacific Loans agreed with the Commerce Commission that it would repay nearly $135,000 in fees and interest it should never have charged.

It is in the business of lending money, and yet could not, apparently, understand the laws that governed lending.

Pacific Loans charged interest and fees on loans after it had sent round the repossession men.

This is plainly a breach of the law and, when you stop and think about it, a breach of the grimmest kind.

On one side is a lender, with money to consult lawyers and hire repossession agents.

On the other is someone whose life has collapsed around their ears to the point they cannot repay the loans they have taken out, and whose possessions have been taken, and sold.

In 2010, Budget Loans was prosecuted after telling borrowers behind in their Don’t suffer in silence Know your rights Avoid debt, if you can

payments that it could continue to charge interest and fees from them, even after it repossessed and sold their assets.

Budget Loans was again prosecuted last year. The charges included adding interest and fees after repossessing people’s things.

The country is about to do a major rewrite of lending laws, including banning lenders who won’t follow the law from making further loans.

If you think that’s heavyhanded, just look back through a list of some the lenders the Commerce Commission has dealt with in the last three years: Aotea Finance, Pacific Loans, Rapid Loans, Cash to You, B&D Holdings, Budget Loans, Evolution Finance, Kiwi Personal Finance, Dealer Finance, Auto Finance Direct, and that’s not to mention the law-breaking of truck stores, which are lenders by another name. There were a dozen or so of them as well.

In total, these cases involved thousands and thousands of borrowers, each, I am sure, experiencing varying levels of misery.

The tales of Commerce Commission enforcement teach us lessons.

People who do not know their rights are easy victims. Lenders can behave illegally for years before being caught.

Once your money is taken in illegal fees and interest, getting it back is very hard. When you are ripped off, it can take years before a lender is brought to account, if ever.

What is maddeningly frustrating is that the information about how loans and debt collection work are easily found online on the Commerce Commission, Citizens Advice Bureau and Consumer websites.

Not all of us can be walking encyclopaedias on laws governing lending, mortgages, insurance, banking, or KiwiSaver, but all of us need to have a radar for the bad stuff, and an ability to research the law. The rule of thumb for lending is this: if a borrower feels they have been misled, shown no respect, oppressed, or exploited, there’s a good chance their lender is breaking the law.

If this is you, it’s time to fight back, get advice from trusted friends, or budget agencies, or even call up the Commerce Commission.

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DAN KITWOOD/GETTY IMAGES The personal loans industry has a poor record of abiding by the law.