Free audio stream, including stories that are padlocked on our site. Listen on any device, anywhere. Updated twice daily. The audio stream takes several seconds to start on Android devices.Launch Radio player
The country's newest bank says it doesn't agree with the commission's view on its loan repayment insurance dispute but settled so it can move on.
Heartland Bank says its subsidiary Marac Finance stands to make a small loss, if any, from a loan repayment insurance dispute with the Commerce Commission.
But that will have no bearing on Heartland's accounts as the issue has been dealt with in previous financial years.
In a statement earlier today. the commissions says Heartland subsidiary Marac Finance will refund 1000 customers a total of $567,000 over loan repayment insurance.
Customers who repaid the loan early should have had been repaid some of the premium, which was priced for the loan's full term.
Heartland head of retail Chris Flood told NBR ONLINE it didn't agree with the commission that Marac was the loan "arranger".
"But given the small amount of funds involved and from a Heartland perspective we just thought it was better to reimburse the people and move on."
Small loss, if any
Marac customers have already been refunded and it is now seeking repayment from insurance companies.
"It would be my expectation to get most of that back.
"If we are out of pocket it won't be material.
"Probably the money that we'll be out of pocket is the time it's taken to make sure we contact everybody and those sorts of things."
Since 2010, when the issue was raised with Marac, it has paid any premium rebate to the customer directly and then sought a refund from motor vehicle dealer or insurance company.
Parent company Heartland New Zealand posted a 9.2% gain in first-half profit today to $10.7 million.
Its share price (NZX: HNZ) was up 1.37% to 74c this afternoon, on trading of more than 300,000 shares.
The Commerce Commission said in a statement earlier today the refund related to customers who had repaid their loans early between 2006 and 2010.
The commission’s general manager of competition Kate Morrison says in a statement today Marac was thought to be in breach of the Credit Contracts and Consumer Finance Act and the Fair Trading Act.
"We saw a settlement as a timely and cost-effective way of achieving the right result."
The commission says Marac did not include a rebate on the premium when borrowers were advised of the final balance to prepay the loan.
“Borrowers rely on the information provided to them by lenders, and often have no way of ensuring that the balance owing is correct," Ms Morrison says.
“Borrowers should be aware that if a loan is being repaid early, insurance may be rebated, and they can ask the lender if there are any rebates due to them.”
The commission says Marac believed it was not in breach of the Fair Trading Act or CCCF Act.
However, it agreed to make the refunds because its contracts said that it would refund insurance premiums when contracts were prepaid.