Online lender settles $2.8 million with Commerce Commission

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Wellington, March 3, 2021

Commerce Commission Chairperson Anna Rawlings (From CC website)

High-cost short-term lender Limited (trading as Moola) has agreed a settlement with the Commerce Commission whereby it is required to credit or refund approximately $2.8 million to current and former borrowers.

The Company acknowledged the Commission’s view that it charged unreasonable credit and default fees.

Interest at 620.5%

Moola offers loans to borrowers via its website

Prior to the introduction of a daily rate of charge cap in June 2020, it offered loans with interest rates as high as 620.5% per annum.

The Commission began investigating Moola after receiving complaints, including from a Christchurch budget advisory service. In September 2017, the District Court raised concerns about the level of Moola’s fees and invited the Commission to intervene in debt recovery proceedings taken by Moola.

As a result of the investigation, the Commission considers that between February 2016 and July 2017, Moola is likely to have charged unreasonable credit and default fees, breaching the Credit Contracts and Consumer Finance Act 2003 (CCCFA).

What the company charged

During the period of the investigation, Moola charged (1) default fees of $60 where the reasonable fee as calculated by the Commission was from $10.24 to $15.66 (depending on when the fee was charged) (2) establishment fees of $150 or $350 depending on the term of the loan, where the reasonable fee as calculated by the Commission was either $4.47 or $5.48 (depending on when the fee was charged) (3) processing fees of $50 where the reasonable fee as calculated by the Commission was either $10.86 or $12.25 (depending on when the fee was charged).

Commerce Commission Chair Anna Rawlings said that the Commission considered that during the relevant period, Moola’s default fee, establishment fee and processing fee recovered costs that were not closely related to the matter for which the fees were being charged, as required by the CCCFA.

“Moola acknowledges our view and has undertaken to credit or refund affected customers the difference between the fee charged and the fee we calculated was a reasonable fee. Fees must recover costs that are ‘relevant and closely connected to the activity for which the fee is charged.’ Our view is that Moola’s fees recovered more than those costs,” she said.

Moola responds well

Moola cooperated with the Commission’s investigation and reduced its fees prior to and again during the investigation. In light of the business disruptions caused by Covid-19, the Commission agreed that it would allow Moola six months to calculate the refunds it owed customers before the public was notified of the settlement.

“Moola agreed to identify affected customers and calculate the difference between the amount charged and the reasonable amount calculated by the Commission, which it has now done. Affected customers will be credited or refunded by Moola within the next 12 months,” Ms Rawlings said.

Website check

Moola has also agreed to prominently publish information about this Agreement on its website. Anyone who had a loan with Moola between February 2016 and July 2017 can check there for more information. Moola will confirm it has complied with agreement by providing a final report prepared by an independent accountant approved by the Commission.

Another case in High Court

The Commission has separately taken High Court proceedings against Moola alleging irresponsible lending. That is unaffected by the settlement relating to unreasonable fees.
Other unreasonable fees cases

Fees have been a priority area for the Commerce Commission.

In addition to this investigation, other unreasonable fees cases taken by the Commission include the following:
High Court proceedings filed against Harmoney over its “platform fee”
High Court proceedings filed against UDC Finance Limited
High Court proceedings filed against Real Finance Limited
Auto Finance Direct agreed to return approximately $460,000 in fees to borrowers
Acute Finance was fined $22,000 and returned $10,000 to borrowers
Cash to You Loans was banned from lending for offending which included charging unreasonable fees
Rapid Loans agreed to compensate borrowers $1.4 million.

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