Baycorp settlement sends message to credit industry – Commerce Commission

The Commerce Commission says its settlement with Baycorp NZ sends a strong message to the credit industry to comply with their obligations under the Credit (Repossession) Act 1997.

Under the settlement, debtors have been refunded or had account balances reduced by a total of $3.5 million.

In a press release, the commission claims Baycorp is likely to have breached the Fair Trading Act 1986 by claiming it has a right, on behalf of its clients, to add collection costs, some legal and court costs and interest, on to a debtor’s balance after security items have been repossessed and sold.

The Credit (Repossession) Act 1997 prohibits a lender from recovering more than the debt balance outstanding after goods have been repossessed and sold, according to the commission.

Commerce Commission chairman Dr Mark Berry says this settlement is not just about Baycorp but is a signal to all companies involved in lending, repossession and debt collection.

“Once sale of a repossessed item has occurred, the CRA prohibits a creditor from recovering more than the debt balance outstanding after deducting the net proceeds from the item’s sale,” Dr Berry says.

The commission says the issue hinges on lack of awareness by lenders and debt collectors as to how the CRA applies to them.

“We are becoming increasingly concerned about the lack of understanding by many companies operating in this industry about their obligations under the CRA. This settlement puts them on notice that there are potentially severe consequences if they get it wrong,” Dr Berry says.

Baycorp has changed its debt collection practices to ensure the relevant information is collected from its lender clients, the commission says in a press release.

“The company cooperated fully with the Commission during this investigation and while it acknowledges the view of the Commission, it does not admit liability in relation to a breach of the Fair Trading Act,” according to the press release.

Baycorp has agreed to reduce the outstanding debtor balances of 2370 current accounts by $3,457,634 and pay $46,107 to debtors who paid back more than the balance owing.