The Commerce Commission said yesterday it would start High Court proceedings against NZ Fintech Ltd (trading as Moola), alleging it’s breached the lender responsibility principles contained in the Credit Contracts & Consumer Finance Act.
Moola provides high cost short-term loans up to $5000 via its websites.
During the period the commission’s proceedings relate to – June 2015-November 2017 – Moola offered short-term loans with interest rates of between 182.5-547.5%/year, depending on the term of the loan.
The commission alleges Moola failed to exercise the care, diligence & skill of a responsible lender, as required by the lender responsibility principles, in that it:
- failed to make inquiries so as to be satisfied of the borrowers’ requirements & objectives
- failed to make inquiries so as to be satisfied of the borrowers’ ability to repay without substantial hardship
- failed to exercise care, diligence & skill in text & email advertising
- failed to treat borrowers reasonably & ethically when breaches of loan agreements occurred
- failed to ensure loan agreements weren’t oppressive, including interest rates, and
- failed to ensure it didn’t induce borrowers to enter into agreements by oppressive means.
The commission said it would seek:
- declarations that Moola’s conduct breached the Credit Contracts & Consumer Finance Act
- injunctive relief preventing Moola from new lending without taking specified steps to ensure it meets its legal obligations
- cost of borrowing to be returned to 50 identified borrowers
- orders for consequential relief, and
- interest &/or costs.
The commission said it began its investigation following a referral from a Christchurch budget advisory service.
The commission launched a lender website review in June last year, looking at the websites of 215 lenders to determine if they were likely to be complying with their responsibilities under the act. It showed interest rates of up to 803%/year and over 500 different named fees.
New chief executive says NZ Fintech will fight claims
NZ Fintech chief executive Guy Randall, who joined the company in April after a year as sole director of Christchurch property developer David Henderson’s SOL Development Corp Ltd, issued a statement following the commission release, saying NZ Fintech believed it had appropriate processes for assessing whether a loan was suitable, and it was confident it was a best practice operator & socially responsible lender.
Mr Randall said the commission had told the company it was investigating a small number of complaints in 2017, and the company had co-operated with the investigation and worked closely with the commission to understand its concerns.
He said Moola loans were for short-term cashflow needs and weren’t suitable for every situation.
Mr Randall added that NZ Fintech would defend the commission’s claim “and welcome any clarity about responsible lending practices that can ultimately be provided”.
The directors – young actionman & fintech entrepreneur
The 2 directors of NZ Fintech (previously named Moola.co.nz Ltd) are Steve Brooks & founder Eddie Recordon, both of Christchurch.
Mr Brooks is a director of numerous other companies, including Taurus Investments Ltd, Astute Property Group Ltd & tax agent My Refund Ltd.
He was a finalist for EY young entrepreneur of the year in 2010, founded the Dream Believe Succeed Foundation to support the region’s youth develop their entrepreneurial spirit, and was revealed a fortnight ago as the man who paid for a full-page newspaper ad promoting Air NZ chief executive Christopher Luxon for National Party leader & prime minister following Mr Luxon’s announcement that he would resign this year and was contemplating a political future.
Mr Brooks started selling real estate before he left school, bought his own first house for $89,000 when he was 16 and sold it 6 months later for $56,000 more, and claimed to have succeeded in his aim of becoming a self-made millionaire by the age 0f 19.
Eddie Recordon, the other director, says on his LinkedIn page: “Experienced in developing premier brands & disruptive business models, I am a fintech entrepreneur based in New Zealand.
“Pioneering New Zealand’s first fintech company in 2008, I recognised the potential of developing solutions based around intelligent software platforms & online access that could revolutionise the way financial products are processed & managed. In 2013, I developed & launched what has now become New Zealand’s #1 digital lender.”
FinTech’s website says of itself: “As a technology-driven company, and award-winning financial leader, NZ FinTech leverages innovation & technology to identify opportunities to further enhance how FinTech is disrupting the traditional approach across consumer finance.
“NZF’s highly scalable & bespoke purpose-built platform drives significant efficiency & complete transparency over the consumer lending process, eliminating room for human error and simultaneously managing regulatory compliance.
“Processing over 100,000 loans every year, NZF’s approach integrates responsible lending policies with sound lending practices, providing a better finance solution for customers.
“NZF’s innovative approach, adoption of faster digital-driven solutions & enhanced processes is positively disrupting the industry.”
Attribution: Commission release, NZ Fintech websites, LinkedIn.