The Commerce Commission has officially warned the Auckland Council for potential breaches of the Credit Contracts and Consumer Finance Act (CCCF Act) over a scheme that thousands of ratepayers participated in.
The warning, in the form of a letter, has been issued in relation to the council's Retrofit Your Home Programme (RYH Programme), which 20,000+ ratepayers joined between 2011 and 2020.
The commission said the council had itself reported the matter to the commission "and has co-operated fully with the Commission’s investigation".
"It has advised the Commission that it intends to credit all interest charges and rate penalties charged to affected borrowers; totalling more than $10 million."
The commission says it will not be taking further action against Auckland Council at this time in relation to this conduct, but this does not prevent third parties from doing so.
"We will take this warning into account if Auckland Council was to engage in similar conduct in the future," it says in its letter.
The RYH Programme, which ratepayers could join from 2011 until 2020, involved Auckland Council offering financial assistance to ratepayers who wished to improve their property with insulation, heating, ventilation and/or energy efficiency measures. Loans made through the RYH Programme are consumer credit contracts under the CCCF Act. As such Auckland Council is obliged to meet certain obligations imposed by the CCCF Act.
In the commission’s view, Auckland Council likely breached its obligations under the CCCF Act by failing to:
- make reasonable inquiries before entering into an agreement with a borrower, so as to be satisfied that it is likely that the borrower will make the payments under the agreement without suffering financial hardship;
- adequately assist borrowers to reach informed decisions as to whether or not to enter into the agreement and be reasonably aware of the full implications of doing so;
- adequately meet its obligations to publish certain information on its website;
- ensure that the key information was disclosed to every borrower before the contract is entered into;
- ensure that it met its obligations in terms of continuing disclosure statements; and
- ensure payments were credited as soon as practicable.
Commission chair, Anna Rawlings said the council failed to ensure that it had processes in place to meet its obligations under the law "and this went unchecked for a number of years".
"This case demonstrates the importance of understanding the extent of your obligations. We urge anyone who is entering into arrangements for the sale of goods or services on deferred payment terms to get legal advice about whether they have to comply with the CCCF Act.”
The commission has written to other councils and local authorities to make them aware of the warning and to encourage them to take legal advice to ensure any similar schemes they may be running are compliant.
A warning letter like that issued to the Auckland Council explains the Commerce Commission’s opinion that the conduct at issue is likely to have breached the law. Only the Courts can decide whether a breach of the law has in fact occurred.
A warning letter is to inform the recipient of the commission’s view that there has been a likely breach of the law, to suggest a change in the recipient’s behaviour where appropriate, and to encourage future compliance with the law.