Wellington, July 11, 2019
The Commerce Commission has filed High Court proceedings against Westpac New Zealand Limited (Westpac).
The Commission alleges that the Bank breached the Credit Contracts and Consumer Finance Act 2003 (CCCFA) by failing to provide key information that it was required to give customers under the Law.
Westpac reported to the Commission in March 2018 that it had failed to provide key initial disclosure information to 19,000 personal credit card customers when they first took out their credit card between May 2017 and March 2018. The Commission alleges that due to a process error, when Westpac posted new credit cards to some customers, they did not also receive disclosure of the terms of credit.
The Commission is seeking a declaration that Westpac breached its initial disclosure obligations under the CCCFA and is seeking an order for the return of costs of borrowing to affected borrowers and an order for payment of statutory damages to affected borrowers.
Commission Chair Anna Rawlings said this is an important case for both the Commission and borrowers.
“This case is important for clarifying the scope of lender liability to borrowers, in a situation where thousands of customers were not provided with initial disclosure required under the law,” she said.
“The law provides for remediation for customers when their lender fails to give disclosure properly and in this case we are asking the Court to determine whether Westpac breached its obligations, and if so, to decide how those statutory remedies should be applied,” she added.
In late March 2019, the Commission announced that it had filed proceedings against finance company Linsa Finance, seeking costs of borrowing or statutory damages for 1700 loan contracts in respect of which key information was not disclosed.
Initial disclosure is key information about a loan that lenders must give to borrowers, such as the amount owing, interest and payment details, details about the lender such as their dispute resolution provider, hardship rights, and how to cancel the loan. It helps borrowers understand what the loan will cost them and what their and the lender’s obligations are under the loan.
The disclosure rules ensure the borrower gets the details of their loan, and a written record of the key terms of their contract, before they enter into it.
The key information is set out in Schedule 1 of the CCCFA.
Costs of borrowing
Cost of borrowing includes interest, credit fees, and default fees. A lender cannot enforce the costs of borrowing against a borrower that are charged over any period during which the lender has failed to comply with section 17 of the CCCFA, which sets out initial disclosure requirements.
The CCCFA allows for the award of statutory damages against a creditor (lender) if the lender fails (a) comply with the rules about disclosure for borrowers and guarantors (b) comply with the rules about interest including disclosing interest and how and when it can be charged (c)
make disclosure about credit-related insurance, repayment waivers, or extended warranties.
The minimum and maximum amounts of statutory damages are set out in the CCCFA.
Lenders are able to apply to the court to reduce or extinguish their liability for statutory damages.