Real Finance will refund $1.36 million to borrowers it overcharged

Real Finance is to pay $1.36 million to 515 customers it overcharged after reaching a settlement agreement with the Commerce Commission.

The commission opened an investigation into the Wellington-based consumer lender in 2018 after it received a request from the District Court to intervene in a Real Finance claim for summary judgment against a borrower.

The commission then filed a civil suit against Real Finance in 2019, alleging that it charged borrowers unreasonable fees.

In a statement released today, the commission said Real Finance admitted to entering into consumer credit agreements with borrowers between April 2013 and March 2020 that violated the Credit Agreements and Consumer Finance Act ( CCCFA) because the fees charged exceeded the reasonable costs incurred by the company.

Commission chair Anna Rawlings said when people borrowed money to buy goods on credit, the credit and default charges they were charged were not meant to be used to cover expenses general business or to make a profit.

“This case will help lenders to set charges in a way that is consistent with their obligations under credit law. It also shows that regular review of your charges is not enough on its own. Lenders must also respond to the findings of any review.”

Although Real Finance undertook annual fee reviews, it took no action to prevent fee-generating profits, Rawlings said.

“If lenders find their fees to be unreasonable, they should be reduced. If borrowers are overcharged, the commission expects a lender to reimburse affected borrowers.”

The commission engaged KPMG to calculate reasonable costs and found that the basic set-up, administration and default fees charged by Real Finance included expenses that were not closely related to the matter for which the fees were billed.

In April 2022, the High Court granted statements requested by the commission, unopposed by Real Finance, that Real Finance had breached its obligations under the CCCFA by charging unreasonable fees.

The commission said Real Finance would contact affected borrowers as part of the settlement and agreed to create a page on its website with information about repayments due to affected borrowers.

In a statement on its website, Real Finance said it had updated its fee-setting practices to ensure future charges were reasonable.

“Real Finance sincerely apologizes for the inconvenience resulting from your loan account receiving a partially unreasonable charge.”

Chief Executive Rodney Varga said he has been proactively engaging affected consumers since February 2022 in anticipation of this settlement.

“[We] are pleased with the progress made so far and the understanding and positive interactions with these customers. »

Real Finance is owned by David Ure and Varga, according to Companies Office records.