Finance company fined in first case for taking security over prohibited items
Finance company Aotea Finance (West Auckland) Limited (Aotea West Auckland) has been fined $48,750 for taking security
over prohibited items such as beds and cooking equipment.
In the Commission’s first such prosecution, Aotea West Auckland pleaded guilty to five representative charges under the
Credit Contracts and Consumer Finance Act 2003 (CCCF Act) for offending which occurred between June 2015 and March 2016.
The CCCF Act prohibits lenders from using essential cooking and medical equipment, portable heaters, washing machines,
refrigerators, beds and bedding, and critical identity and financial documents as security for loans, meaning that
lenders cannot repossess these items if the borrower fails to make payments.
Aotea West Auckland took security interests over items such as beds, cooking equipment, washing machines and
refrigerators. Of 52 sample contracts viewed by the Commission, 19 contracts showed a security interest unlawfully
claimed over prohibited items.
“These goods are protected by law because, generally, they are worth more to borrowers than they are worth as security
for loans. Lenders may not use the threat of repossession of these goods to encourage borrowers to pay,” said
Commissioner Anna Rawlings.
In sentencing in the Waitakere District Court on Friday 26 October, Judge June Jelas said “the legislation is designed
to protect the vulnerable, and high standards are required of those who operate within it.”
She said she accepted “there was no repossession, or risk of repossession, given the lender’s policy, but by entering
into the contract the borrowers, who were generally vulnerable, believed they were at risk of losing items that were of
high value to them.”
Her Honour Judge Jelas said that the level of harm and stress that could be caused to borrowers by the offending is
difficult to quantify, but that a high level of deterrence should be applied.
The Aotea Finance group of companies comprises five separately registered companies with a single group manager. All
charges were against Aotea Finance (West Auckland) Limited only.
The court also ordered Aotea Finance to pay statutory damages totalling $4,515.41 to the 19 affected borrowers.
ends