Kiwi watchdog fines mobile resellers $171,500 for dodgy lending practices
- 15 June, 2016 22:21
Mobile reseller traders Goodring and Betterlife Corporation have been fined a total of $171,500 after being sentenced in Auckland District Court, after being convicted of dodgy lending practices.
According to Commerce Commission reports, the companies are the first to be sentenced under strengthened Credit Contracts and Consumer Finance Act 2003 (CCCFA) laws for lenders which came into force last year.
Based in Auckland and usually operating from a truck or through using door-to-door sales staff, both Goodring and Betterlife sell consumer goods on credit such as electrical items at significantly higher prices than mainstream stores.
For example, one Betterlife customer purchased an iPhone 5C for $2,401 to pay off in instalments when these phones typically retail for around $600.
Following the investigation, Goodring was fined $98,000 for breaches of the CCCFA, and the Financial Service Providers (Registration and Dispute Resolution) Act (FSPA) while Betterlife was fined $73,500 for breaches of sections 17 and 32 of the CCCFA.
Goodring and Betterlife had earlier pleaded guilty to 28 charges and six charges respectively under the CCCFA, relating to their lending practices.
Both companies failed to provide borrowers with the legally required information and the information was also not provided in a clear and concise way, as required by the Act.
In sentencing the companies, Judge Sharp acknowledged that these were the first prosecutions under the increased penalty maximums applying to misleading or unclear lender disclosure.
Judge Sharp says that both Goodring’s and Betterlife’s terms and conditions suffered from “serious and significant deficiencies” and accepted that they would have been extremely difficult or impossible for the debtors to read or understand.
Commission General Counsel Mary-Anne Borrowdale says that the sentences are a result of the Commission acting on the problems it found during its year-long project on the mobile trader industry.
“We have been actively enforcing the amended credit laws since their introduction and they are important in protecting some of New Zealand’s more vulnerable consumers,” Borrowdale adds.
“We regarded the conduct of Betterlife and Goodring as serious because of the deficiencies in their loan contracts.
“Although the penalties given in this case were more than previously, we are considering whether they are adequate to address the non-compliance that we are seeing.”
Borrowdale says this is far from the end of the Commission’s enforcement action against mobile traders and lower-tier lenders.
“We have a good number of other court cases and active investigations into mobile traders,” she adds.
“These companies sell high priced goods to vulnerable consumers on credit in order to fund the purchase. We have found that a concerning number of mobile traders and lenders do not comply with the law, and we are taking action to change that.”
The Commission has prosecuted six mobile traders this year, including Goodring and Betterlife.
As reported by Reseller News, in February Flexi Buy Limited was fined $50,000 in the Auckland District Court and $3,480 was awarded in damages to affected customers.
The fourth trader, Ace Marketing Limited, has pleaded guilty to the Commission’s charges and is expected to be sentenced in July.
The fifth, Macful International Limited, appeared in Manukau District Court on Monday, June 13, on 21 charges under the CCCFA and the Finance Service Providers (Registration and Dispute Resolution) Act 2008 while the sixth mobile trader has not yet appeared in Court.
Borrowdale says the Commission has a further 14 ongoing investigations into the conduct of mobile traders.
In August 2015, the Commission published its mobile trader report after a year-long investigation into the industry, uncovering that 31 of the 32 mobile traders identified did not comply with all of their obligations under the Fair Trading Act 1986 and CCCFA.