$400K fine over fake savings scheme

AUCKLAND: A company has been fined $400,000 for falsely claiming to offer a savings scheme to help lowincome families buy a home, following a Commerce Commission investigation.

Home Funding Group Ltd (HFG) was convicted on two charges under the Fair Trading Act in the Auckland District Court last month.

It is in liquidation and did not appear at the hearing.

The company offered services to prospective home buyers who found it difficult to save for a deposit or qualify for bank finance.

It claimed to operate a savings scheme which could assist customers to buy a home with a deposit as low as 5%.

However, customers’ payments were not paid into or treated as being in any form of savings scheme, according to a Commerce Commission statement.

The contracts customers entered into were for a brokerage and financial coaching service.

Between February 2015 and April 2017, the company received $316,361 from 149 customers. They typically paid the company $50 to $100 a week.

Commerce Commission chairwoman Anna Rawlings said the claims made by the company induced consumers to make regular payments to the company in the belief they were putting money towards a house deposit, but they were not.

‘‘In fact they were paying for financial services, and HFG’s contract allowed HFG to limit or avoid providing those services,’’ she said.

In presentations to customers, the company made various representations, including that at the end of the contract term customers would get back the money they paid to it; money paid to HFG could be used for a house deposit; and that the company had special relationships with various banks.

‘‘HFG did not have special relationships with any bank.

‘‘The money paid could not be used for a deposit, and the commission is not aware of a single customer who completed the HFG contract and successfully purchased a home,’’ Ms Rawlings said.

In sentencing remarks, Judge Josephine Bouchier said it was a ‘‘carefully crafted scheme’’ and the conduct involved ‘‘serious offending against vulnerable people’’. She noted that affidavits from four victims were ‘‘extremely sad’’ and ‘‘heartrending’’ and that all four complainants were still unable to buy houses of their own.

She directed full refunds be paid to eight complainants named in the commission’s case and voided their contracts.

Since the company is now in liquidation, the liquidator will determine whether refunds will be paid. — RNZ