The Commerce Commission has reached a settlement with Cash Converters and its associated companies in New Zealand. As part of the settlement the companies accept they breached the Credit Contracts and Consumer Finance Act (CCCF Act) in relation to payday loan contracts, known as Next Pay loans. (‘Payday loans’ are typically short-term unsecured loans that are advanced to borrowers who need money for bills or unforeseen circumstances until they receive their next pay.)
A Commission investigation identified that the inclusion of certain costs within the set up fees for Cash Converters’ Next Pay loans may be unreasonable under the CCCF Act.
The loans investigated differed from most other types of payday loans in that no interest was payable. Instead, when the loans were taken out, ‘establishment fees’ and ‘data management fees’ were charged to the customer.
Under the CCCF Act any fee charged by the lender when setting up the loan is an establishment fee