Commission alleges irresponsible lending by Moola

8 July 2019

The Commerce Commission is to commence High Court proceedings against NZ Fintech Limited (trading as Moola) alleging that it has breached the lender responsibility principles contained in the Credit Contracts and Consumer Finance Act 2003 (CCCFA).

Moola provides high cost short term loans up to $5,000 via the moola.co.nz and needcashtoday.co.nz websites.

The Commission’s proceedings relate to Moola’s conduct between June 2015 and November 2017. During that period Moola offered short term loans with interest rates of between 182.5% and 547.5% per annum depending on the term of the loan.

The Commission alleges that Moola failed to exercise the care, diligence and 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 and objectives

• failed to make inquiries so as to be satisfied of the borrowers’ ability to repay without substantial hardship

• failed to exercise care, diligence and skill in text and email advertising

• failed to treat borrowers reasonably and ethically when breaches of loan agreements occurred

• failed to ensure loan agreements were not oppressive, including interest rates

• failed to ensure it did not induce borrowers to enter into agreements by oppressive means.

In all causes of action the Commission seeks:

• declarations that Moola’s conduct breached the CCCFA

• 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 as the Court thinks fit

• interest and/or costs.

The Commission’s investigation was initiated following a referral from a Christchurch budget advisory service.

As the matter is now before the Court the Commission will make no further comment at this time.

Background
Lender Responsibility Principles
Lenders entering into consumer credit contracts after 6 June 2015 are required to comply with the lender responsibility principles, as set out in the CCCFA.

These include that lenders must make reasonable inquiries, before entering the agreement, to be satisfied it is likely the borrower will make repayments without suffering substantial hardship.

Responsible Lending Code
The Code provides guidance as to how lenders can comply with the principles. It includes the type of enquiries a lender should make into a borrower’s income and expenses, and it specifies that more extensive enquiries should be made if the borrower is vulnerable.

The Code is not legally binding, but if lenders comply with it that will be treated as evidence they complied with the principles.

Lender website review
In June 2018 the Commission launched a lender website review, which looked at the websites of 215 lenders to determine if they were likely to be complying with their responsibilities under the CCCFA. It showed annual interest rates of up to 803% and more than 500 different named fees.

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