Finance company Budget Loans has been stung for $720,000 in fines after lying to borrowers and illegally repossessing their cars, beds and fridges.
Auckland District Court Judge David Sharp today also ordered the company to pay $53,000 in reparations and $38,000 in refunds and credits to borrowers.
Judge Sharp says the actions of the company, which is a combined entity of Budget Loans Ltd and Evolution Finance Ltd, were "cynical and deliberate."
Budget Loans was fined $478,000 and Evolution Finance was fined $200,000 by Judge Sharp. The rest went towards reparations for the 21 victims. Both companies are owned by Allan Hawkins, the former Equiticorp boss who was jailed in 1992 for six years for fraud.
The Commerce Commission, which brought 125 charges under the Fair Trading Act, is taking separate legal action against Mr Hawkins and his son Wayne, who was a director of Budget Loans. The commission is also seeking further compensation for all victims affected by the finance companies in civil proceedings.
"This is particularly outrageous offending. It has been of immense concern to the commission from the beginning," the commission's prosecutor, Alysha Mcclintock, says.
Budget Loans and Evolution Finance were found guilty of guilty of 106 breaches of the Fair Trading Act in July 2016.
The court today heard details from victim impact reports, including illegal repossessions used to punish borrowers, which Judge Sharp described as “hard to read.”
Repo agents take everything
On one occasion an agent was ordered by Budget Loans to “fully clear the house out.”
In other cases, Budget Loans agents were told to fill up their vans and to prioritise taking essential items like cars, refrigerators, washing machines and beds. Often these items were of little value and were thrown out by agents.
One victim whose house was ordered by Budget Loans to be completely cleared out by its agents had five children.
Another borrower had overpaid a loan by $3500 but was told by Budget Loans they owed more than $10,000, a figure that was not corrected by the company.
Budget Loans also falsely marked borrowers' property as "at risk" to justify repossessions.
The defence had argued the company was acting within the law in seeking debt payments and asked for a fine of no more than $200,000 because of the negative press Budget Loans had suffered and its co-operation with the investigation.
Judge Sharp responded by saying: “I can’t see how you can responsibly argue that this is not an extreme case … it far outweighs any other case I have seen.”
"Having purchased bad debts, the defendants' strategy was to get borrowers paying as much as possible for as long as possible."
He says the defendants needed to be held to account and deterred from further illegal activities.
In December last year, Commerce and Consumer Affairs minister Kris Faafoi announced a review of the Credit Contracts and Consumer Finance Act, citing concerns around responsible lending.
History of crime
In July 2016 Budget Loans and Evolution Finance was found guilty of representations made to 21 borrowers while enforcing loan contracts.
The financers convinced the court to dismiss 19 charges but these were successfully appealed by the Commerce Commission in April last year. In November the Court of Appeal dismissed an application for leave to appeal from the companies.
In 2010 Budget Loans was fined about $31,000 for breaches of the Fair Trading Act and returned about $500,000 in interest and fees overcharged to borrowers.
Another of Mr Hawkins' company's, Budget Loans Group, which was a major funder of Budget Loans and Evolution Finance's parent company, was put into liquidation in 2013.
This article is tagged with the following keywords. Find out more about MyNBR Tags
Most listened to
- Fletcher Building chief executive Ross Taylor on the company's restructure
- NZME chief executive Michael Boggs on the NZ Herald's new paywall
- Tim Hunter on GeoOp's disclosure hiccoughs
- Z Energy's Mike Bennetts discusses fuel price and competition
- NBR Radio: The best interviews – updated daily, with Grant Walker