After a two year investigation into lenders and banks charging break fees, a settlement has been reached that will see borrowers refunded.New Zealand Guardian Trust Company acknowledged breaching the Fair Trading Act and the Credit Contracts and Consumer
After a two year investigation into lenders and banks charging break fees, a settlement has been reached that will see borrowers refunded.
New Zealand Guardian Trust Company acknowledged breaching the Fair Trading Act and the Credit Contracts and Consumer Finance Act by using break fees calculated using a formula that was different to the one set out in customers’ contracts.
It has entered a settlement with Commerce Commission to refund $165,000 in total to 77 consumers.
Customers of Propertyfinance Securities were charged a break fee formula different to the one in their contracts, which New Zealand Guardian Trust admitted was misleading to borrowers.
Commerce Commission enforcement manager Graham Gill said banks and lending institutions need to ensure when quoting or charging break fees they stuck to the contract.
“While New Zealand Guardian Trust only charged customers the break fee that it was charged by its bankers, a creditor has to charge break fees using the method disclosed in customers’ contracts,” Mr Gill said.
“Break fee formulae are complicated and the average customer is unlikely to be able to check the calculation to confirm that it is correct. Customers are reliant on creditors getting it right because otherwise there can be huge financial impacts.”
