Supreme Court dismisses appeal from Motor Trade Finance, Sportzone over credit fees

The ruling may be the last challenge by the car finance business MTF and Sportzone.

The Supreme Court has dismissed an appeal by Motor Trade Finance [NZDX: MTFHC] and Sportzone Motorcycles against rulings in a case brought by the Commerce Commission that fees they charged in loan contracts were unreasonable.

The ruling, made public on Thursday, may be the last challenge by the car finance business MTF and Sportzone after they were found to have breached the Credit Contracts and Consumer Finance Act (CCCFA) in a 2013 High Court ruling.

The commission's case was that the companies breached consumer protection law over fees charged in 39 loan contracts originated by Sportzone between May 2005 and July 2008. Sportzone was a motorcycle sales and repair business that has since gone into liquidation. It had an agreement with MTF allowing it to write credit contracts for buyers of motorcycles.

The commission began investigating the two companies in 2006 in response to complaints about their lending practices and began its prosecution in the High Court in 2009. It was another four years before the court released its first judgment, finding the companies had charged unreasonable fees. The court released a second judgment in 2014 clarifying the rules lenders must follow when charging credit fees.

MTF and Sportzone then appealed to the Court of Appeal only to be knocked back in March 2015. But they subsequently appealed to the Supreme Court, to be turned down a second time in the ruling released today. The court ordered them to pay costs of $25,000.

"The Supreme Court has made clear that credit fees should only cover costs that are closely related to the particular loan transaction,"  commission general counsel Mary-Anne Borrowdale says." It agreed with the commission that the purpose of the CCCFA is to protect borrowers, ensuring transparency in the costs of borrowing. Fees should not be used to recover general business costs or to generate profits – that is what interest is for."

The commission said the Supreme Court ruling has provided "the definitive ruling on a key piece of credit law."


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