Payday lender Moola, which charges interest rates of over 500% per annum, faces legal action for its lending practices.
Trade Commission is suing Fintech Limited, which operates as Moola, in the High Court and alleged that the company violated responsible lending practices under the Credit Contracting and Consumer Finance Act 2003 .
Moola offers short term loans of up to $ 5,000 through its websites moola.co.nz and needcashtoday.co.nz.
The procedure concerns the behavior of the lender between June 2015 and November 2017, a period during which Moola offered short-term loans with rates between 182.5% and 547.5%.
The commission alleges that Moola failed to exercise the care, diligence and skill of a responsible lender because it failed to investigate to be satisfied with the requirements and objectives of the borrowers, did not not found out whether borrowers had the ability to repay the money smoothly and did not exercise due care and diligence in text and email advertising.
He also alleges that the company failed to treat borrowers in a reasonable and ethical manner when breaches of loan agreements occurred, failed to ensure that loan agreements were not oppressive, including interest rate, and failed to ensure that it did not induce borrowers to make deals through oppressive means.
The commission’s investigation was prompted by a referral to a budgeting consultancy in Christchurch.
The commission seeks reimbursement of borrowing costs from 50 people and claims that Moola’s conduct violated the law as well as a provision prohibiting Moola from new loans without taking action to ensure that she meets her expectations. legal obligations.
The commission would not comment further as it was now in court.
The law changed in 2015, which required lenders to adhere to the principles of responsible lending.
These principles state that lenders should do reasonable research, before entering into the agreement, to be satisfied that the borrower is likely to make repayments without experiencing significant hardship.
A responsible lending code has also been put in place by the industry to help provide guidance on how to lend and comply with the principles.
The code is not legally binding, but if lenders comply with it, it will be taken as proof that they have complied with the principles.
Company office records show that Moola.co.nz Ltd is jointly owned by Taurus Investments and EJ Recordon Holdings and its directors are Steve Brooks and Edward Recordon.
Brooks came to public attention earlier this year for running a newspaper ad announcing that the outgoing Air New Zealand chief executive was the next National Party leader.
The Herald asked Moola for comment.