The Commerce Commission recently obtained its first pecuniary penalty in connection with high-cost lending rules that were introduced in 2019.

The Commerce Commission has obtained a $200,000 pecuniary penalty against high-cost lender, Eagle M.A.N Group Limited (trading as Eagle MAN), following multiple breaches of the Credit Contracts and Consumer Finance Act 2003 (CCCFA).

Key takeaways

1. High-cost lenders have additional requirements they must comply with when providing loans to borrowers, including caps on the number of loans they can issue to borrowers and the amount they can charge in interest and fees.
2. The Commerce Commission continues to actively monitor creditor compliance with the CCCFA and take enforcement action in cases where it considers there has been a breach, particularly if the breach may result in harm to borrowers.
3. The CCCFA has been amended several times in the last decade with further reform still to come. This means creditors should undertake frequent reviews of their systems and processes.

A high-cost loan is a loan with an annual interest rate of more than 50% and presents a particular risk to vulnerable borrowers who do not have other credit options. Some of Eagle MAN’s loans included interest rates of 182.5%, in addition to credit and default fees.

The Christchurch High Court agreed with the Commerce Commission that Eagle MAN had breached a number of the high-cost lending rules, including advancing loans with interest and fee charges that exceeded the amount of money borrowed and giving repeat high-cost loans to borrowers.

Eagle MAN’s breaches appeared systemic with over half of the sample high-cost loans reviewed by the Commerce Commission being in breach of the CCCFA.

Get in touch

If you have any questions about your company’s compliance with the CCCFA or any of the ongoing changes in this space, please get in touch with one of our contacts.