LAWFUEL – NZ Legal Jobs & Law News – Geneva Finance Limited has refunded $588,114 to over 900 customers, following an out-of-court settlement with the Commerce Commission.
Under the settlement, Geneva Finance admitted that it breached the Fair Trading Act by representing it had the right to charge customers additional interest and fees on their loans after security items, in most cases motor vehicles, were repossessed and sold. Under the Credit Repossessions Act, an outstanding debt becomes ‘crystallised’ once a repossessed security item is sold and the sales proceeds are credited to the loan. The creditor cannot recover interest and credit fees on the remaining outstanding debt.
Geneva Finance misrepresented that the additional interest and fees were due when it sent statements and or reminder letters to those customers affected by the breach.
The refunds, completed in June 2007, consisted of approximately $40,000 in direct refunds to customers, with the balance being completed by crediting refunds to customer accounts.
In one case, a customer received a credit of $707.56 after Geneva Finance charged penalty interest and fees to his account for a year.
Paula Rebstock, Chair of the Commission said “Once the Commission began investigating this issue, Geneva Finance moved quickly to review all relevant accounts and took immediate action to refund these charges and put in place measures to prevent the same breaches from happening again”.
“It is not acceptable for finance companies to make these kinds of mistakes. They are in a position of trust and must ensure their systems comply with the law,” said Ms Rebstock.
“We expect others in the industry to ensure they are not overcharging customers who have defaulted on their loans. Although they may have defaulted, these customers still have legal rights that cannot be ignored or avoided by finance companies,” said Ms Rebstock.
Geneva Finance is a registered company operating in the non-bank consumer credit market. It lends largely to consumers whose credit profiles represent a higher credit risk than traditional bank customers.
As part of its lending criteria Geneva Finance used motor vehicles and household chattels as securities for consumer credit contracts.
Under section 35 of the Credit (Repossession) Act, if the net proceeds of sale are less than the amount required to settle the agreement as at the date of the sale, the creditor is not entitled to recover more than the balance left after deducting those proceeds from that amount (whether under a judgment or otherwise).
Any representations made by the creditor requiring payment of any further interest and ongoing credit fees, in addition to the remaining debt owing after repossessed goods were sold, is a breach of section 13(i) of the Fair Trading Act.