Broadlands Finance will repay customers $3.3 million in overcharged fees and interest as part of a settlement with the Commerce Commission.
The Auckland-based lender was found to have breached section 35 of the Credit (Repossession) Act when it charged interest and fees following the sale of repossessed property, as well as breaching the Fair Trading Act when it misled customers that it had the right to do so, the regulator said in a statement.
The commission began investigating Broadlands in 2012.
It will repay 807 customers in a combination of cash payments and credits to accounts and has given undertakings about its future conduct, which the commission can enforce through the courts.
This is the first time the commission has obtained court-enforceable actions, which were introduced as part of recent consumer law reform.
“Broadlands co-operated with the investigation and has undertaken a lot of work reviewing its customer loan files to ensure that refunds have been correctly calculated,” commission chairman Mark Berry said.
“Unfortunately we do see real problems in the debt collection and repossession industry. We have brought several enforcement actions in recent times and have good reason to think that the industry needs to further tidy up its practices.”
The commission entered into settlements with Baycorp (NZ) last December and Geneva Finance in 2007 and prosecuted Budget Loans in 2010 over similar breaches to the Fair Trading Act.
It also prosecuted MAC Warranties earlier this year for its repossession and debt collection practices.
“From now on we expect enforceable undertakings to be a feature of commission settlements involving breaches of the Fair Trading Act,” Mr Berry said.
Tony Radisich owns Broadlands through a 71 per cent stake in his name and the remaining through a holding company called Timberton Investments.