Finance company warned over repossession documentation and post-repossession charges

Finance company Financial Holdings Limited (FHL) has been warned by the Commerce Commission that its repossession documentation and post-repossession charges likely breached the Fair Trading Act 1986 (FT Act) and Credit Contracts and Consumer Finance Act 2003 (CCCF Act).

FHL provides personal and commercial finance, focusing on personal loans for the purchase of second-hand motor vehicles. The Commission commenced its investigation into FHL in May 2018 after receiving a number of complaints from budget advisors about FHL’s conduct.

The Commission investigated whether FHL was collecting or claiming interest and fees after the repossession and sale of secured property, and issuing repossession notices that did not comply with the CCCF Act.

In the Commission’s view, FHL likely breached the FT Act and CCCF Act by charging interest and fees after the repossession and sale of secured property, and it has also likely breached the CCCF Act by:

  • issuing repossession warning notices and post-repossession notices that did not contain all of the key information required under the CCCF Act
  • failing to issue statements of account to borrowers within 7 days after the sale of the consumer goods.

“The law does not allow lenders to charge fees or interest after secured property has been repossessed and sold. Lenders and debt collectors must be familiar with the requirements of the CCCF Act and FT Act, and it should not take a Commission investigation for lenders to comply with those requirements. FHL co-operated with our investigation and advised us that it has changed procedures and documentation to ensure compliance with the CCCF Act,” said Commerce Commission Chair Anna Rawlings.

From information provided by FHL, the Commission considers that 306 borrowers had interest and/or fees inappropriately added to their accounts after the sale of secured property. Customer files showed that FHL charged interest and fees from time to time on two complainant files for 18 years after the repossession and sale of secured property.

FHL has advised the Commission that it will review every loan where secured property was repossessed and sold since April 2014 and will apply credits or refunds where borrowers have been charged any interest or fees after the sale of the secured property.


Debt collection guidance

The Commission issued guidance for debt collectors in 2019.

Warning letters

A warning explains the Commerce Commission’s opinion that the conduct at issue is likely to have breached the law. Only the Courts can decide whether a breach of the law has in fact occurred.

The purpose of a warning letter is to inform the recipient of the Commission’s view that there has been a likely breach of the law, to suggest a change in the recipient’s behaviour, and to encourage future compliance with the law.

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