2 finance companies headed by former Equiticorp boss Allan Hawkins – Budget Loans Ltd & Evolution Finance Ltd – were fined $720,000 in the Auckland District Court yesterday on 125 charges under the Fair Trading Act.Judge David Sharp also ordered the companies to pay $53,000 emotional harm reparations to 9 victims and $38,000 in refunds & credits to borrowers for repossession tactics he described as “cynical & deliberate”.
The Commerce Commission is seeking banning orders against Mr Hawkins, now 76, and his elder son, Wayne Hawkins, who was also a director at the relevant times, following this sentencing & the earlier conviction of Budget Loans on 34 charges under the Fair Trading Act in 2010.
6 years of misrepresenting repossession rights
The Commerce Commission’s general counsel for competition & consumer, Mary-Anne Borrowdale, set out the companies’ practices. She said that, over 6 years from 2009 until 2014, Budget Loans misrepresented its right to repossess goods and recover interest & costs from borrowers. It also misrepresented amounts borrowers were required to pay under attachment orders and made misrepresentations about the benefits of refinancing existing loans.
Budget bought the distressed loan books of National Finance 2000 Ltd in 2006 and Western Bay Finance Ltd in 2008, and has twice been convicted for its handling of them. After the company was fined in 2010, it undertook to return $500,000 in overcharged interest & fees to borrowers.
In 2016, Budget Loans was convicted on 106 charges but 19 charges were dismissed. The Commerce Commission successfully appealed the dismissal decision, and Budget Loans’ application for leave to appeal to the Court of Appeal was dismissed in November 2017.
Mr Hawkins founded 1980s high-flier, the Equiticorp group. After its demise in the 1987 sharemarket collapse, he & other Equiticorp executives & an advisor were tried in relation to financing arrangements behind the group’s $166 million purchase of NZ Steel Ltd from the Government in 1987. Mr Hawkins was sentenced to 6 years’ jail in 1993.
After yesterday’s court hearing, Ms Borrowdale said: “The court acknowledged today that Budget Loans attempted to create cashflow by getting Western Bay & National Finance borrowers to pay as much as possible for as long as possible. It continually added costs & interest to loans and then repossessed essential goods from borrowers without notice when they couldn’t pay, regardless of whether it was legally entitled to do so. “The costs of the repossession were, for the most part, higher than the value of the goods and sometimes Budget Loans simply threw repossessed goods away rather than selling them. It also obtained judgments against some borrowers, but continued to add interest & costs and demanded more from borrowers than the courts had awarded, and to misrepresent its right to repossess.
“Where loans were not secured, Budget Loans sought to convince some borrowers to sign new, secured loans by telling them that they would get a discount on their loan balance. However, the amount of the discounted loan was higher than the amount the borrower was actually required to pay.
“Budget Loans’ conduct & misrepresentations kept vulnerable borrowers in a cycle of debt & repossession. It knowingly engaged in illegal repossessions of essential items from people that it knew were already living in hardship. The financial & emotional distress caused by this conduct to borrowers & their families should not be underestimated.”
83 of the charges were for misrepresentations around repossession, including where there was no valid right to repossess a secured item of property, such as a vehicle or household goods, or where there was no outstanding loan balance to be paid.
“In some cases Budget Loans stripped houses almost bare. In other cases, it repossessed items that it should have known were of low value, and dumped them. Its own loan notes include such comments as ‘someone’s great idea to undertake an illegal repo’ and ‘debtor not to know we can’t repo’.”
29 charges were for adding interest & costs to a loan balance after repossession, when that is not allowed under the Credit Repossession Act.
Ms Borrowdale said: “One borrower declared herself bankrupt when told her loan had ballooned from about $9000 to $57,000. In fact she had less than $2500 to pay at that time. 10 charges were for misrepresentations about adding interest to loans, beyond amounts in attachment orders issued by the courts. One borrower’s loan balance was $8600 following an attachment order, but it was ‘recalculated’ to nearly $56,000.”
The final 3 charges were for misrepresentations about the benefits of refinancing with Budget Loans.
Allan Hawkins is now sole director of Budget Finance & its shareholder, Cynotech Securities Ltd. He & his wife, Laurel, own 99.98% of Cynotech.
He is also sole director of Evolution Finance. Its owner, the previously NZX-listed Cynotech Holdings Ltd, went into liquidation in 2013 after close funding supporters decided they’d no longer pay its overhead & infrastructure costs.
19 April 2017: Judge told to reconsider 19 dismissed charges against Hawkins loan companies
118 July 2016: Hawkins’ finance companies guilty on loan contract enforcement
7 December 2014: Commission files criminal charges against 2 Allan Hawkins finance companies
9 November 2013: Commission tells Allan Hawkins’ finance companies to stop repossessions
31 July 2013: Hawkins goes to McDonald Vague for Cynotech liquidation
11 July 2013: Cynotech share trading halted after backers end support
15 June 2011: Cynotech loss increases as it clears decks
12 August 2010: NZX refuses Cynotech request for waiver
11 August 2010: Cynotech suspended
4 August 2010: Cynotech talks departure, NZX talks suspension
28 July 2010: “Welcome letter” from Hawkins’ Budget Loans to National Finance borrowers came with an illegal $15 fee
16 June 2010: Cynotech slips to loss
14 April 2010: Remaining Cynotech shares to move to NZAX
20 January 2010: Hawkins renews Cynotech privatisation bid
23 December 2009: Hawkins withdraws Cynotech bid after Takeovers Panel asks questions
21 April 2008: Cynotech doubles receivables book to $60 million-plus in 4 months
9 October 2006: Allan Hawkins buys National Finance (Payless Cars) loan book
Attribution: Commission release.