ComCom seeks court ruling on Harmoney fees

Peer-to-peer lender asks government for clearer law.

The Commerce Commission has filed legal action seeking a ruling on fees charged by peer to peer lender Harmoney.

The legal action will be on a “case stated” basis to clarify whether the fee is subject to the Credit Contracts and Consumer Finance Act 2003.

In “case stated” actions, both sides submit an agreed statement of facts and ask the court to rule on the legal implications.

The lawsuit covers the platform fee Harmoney charges borrowers whose loan is financed through the service.

The Commissions says the fee is a “credit fee” under the Credit Contract and Consumer Finance Act 2003 and must therefore cover only the lender’s transaction specific costs. It must also be reasonable.

Harmoney’s current platform fees is $375, which is added to the amount of loan approved.

Before December last year Harmoney charged a platform fee as a percentage of the amount borrowed.

Harmoney’s view is that it is not a creditor and that the fee is the revenue it earns for running the service.

In a statement, Harmoney joint chief executive Neil Roberts says the company took extensive legal advice before launching the business.

“As the first peer to peer provider to seek and obtain a licence, we consulted with the Commerce Commission and [the Ministry for Business, Innovation and Employment] providing them with full details of our business model including detailed information about fees. 

“From the time the Commerce Commission decided to consider further the application of CCCFA as it may apply to P2P lending providers, which was sometime after our licence had been provided and the marketplace was in operation, Harmoney has been cooperative with the Commission.”

Mr Roberts says Harmoney has invested heavily in creating a new business model and like many technology start-ups is yet to make a profit.

The company made a pretax loss of $14.2 million on revenue of $8.6 million in the year to March.

“It is disappointing that the Commerce Commission is seeking to clarify the legal position, as it affects the entire peer to peer industry, by bringing this case stated action using Harmoney’s operating model as the basis for the judicial review.”

Mr Roberts says he has met with Commerce Minister Paul Goldsmith to ask the issue to be clarified by legislative change.

A Commerce Commission spokesman took issue with Mr Roberts’ comments.

“It is not true that before their launch they gave us all their company information including fees modelling,” he said. “They no doubt provided the FMA with information in applying for their license, but not us. Harmoney has also never produced its ‘extensive legal advice’ in response to our requests for it.”

Harmoney uses a website platform to broker loan deals between individual lenders and borrowers.

According to its website, it has brokered $296 million of loans since launch in September 2014.

Harmoney shareholders include Heartland Bank, TradeMe and UK-based investor P2P Global Investments.

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