Commerce Commission takes legal action against Wellington-based Real Finance over unreasonable fees and charges

Commerce Commission takes legal action against Wellington-based Real Finance over unreasonable fees and charges

The Commerce Commission is taking legal action against Wellington based finance company Real Finance Limited.

The commission alleges that from 1 April 2013 until 26 June 2019 Real Finance breached the Credit Contract and Consumer Finance Act (CCCFA) by charging borrowers unreasonable establishment, monthly administration, and default fees on personal loans.

Under the CCCFA lenders are prohibited from charging consumers unreasonable credit and default fees. The commission is seeking a declaration that the company has breached the Act, as well as orders to compensate affected borrowers. A 2016 Supreme Court decision ruled that fees under consumer credit contracts cannot be used to generate profits, or to recover business costs that aren’t connected to the matter giving rise to the fee.

Real Finance director Rodney Varga says he’s still assessing the commission’s allegations.

“As the matter is before the Court, it would be inappropriate for me to comment on the proceedings save to say that we have only recently received them and are considering their contents and next steps.”

Real Finance was established in 2008 and has branches in the capital and Christchurch, as well as an online presence. The Wellington based company’s website offers customers cash loans ranging from $500 to $20,000 with loan terms of between one and 36 months and states:

“A Real Finance loan is generally approved on the day you apply & in most cases you have access to the cash on the same day! We strive to provide approvals within 60 minutes of receiving your completed application and applying is so simple.

“Repayments start as low as $10 per week, & the length of our loans range between 1 week & 3 years. Through nearly 100 years of experience, we realise every single person & situation is different, so we tailor each loan to perfectly suit your individual needs!

“These are our most popular loan type and can be used for holidays, weddings, funerals, bills, shopping, or any other reason you can think of, because whatever the reason is, a cash loan from Real Finance is fast, flexible and tailor made to suit your individual needs.”

The Commerce Commission’s case against Real Finance comes as the Government is attempting to make changes to the CCCFA.

Submissions on the amendments to the CCCFA closed last week. The Government says the legislation is designed to crack down on predatory lending practices and follows a review of the consumer credit laws by the Ministry of Business, Innovation and Employment (MBIE), which released its findings in June last year.  

The Commerce Commission outlined its thoughts on the Government's Credit Contracts Legislation Amendment Bill in a submission to Parliament’s Finance and Expenditure Select Committee. It is backing the changes and says lenders that don’t meet their obligations to their clients should face tougher penalties as outlined under consumer credit law changes the Government has proposed. But it says we still have a long way to go to catch up with Australia when it comes to taking a tougher line on offenders.

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One less wet bus ticket on the Clueless Commerce Commish's stack of 'penalties'....