Acute Finance Limited (Acute) has pleaded not guilty to five charges brought by the Commerce Commission under the Credit Contract and Consumer Finance Act 2003 (CCCFA) about its credit fees and its repayment waiver.

A repayment waiver is when a lender agrees, for a fee, to give up their right to pursue the borrower for what they owe if they can’t make repayments anymore. For example, if they become sick, injured, are made redundant or die.

Four of the charges allege the company charged an unreasonable credit fee. The Commission alleges that the fee Acute charged for its repayment waiver significantly exceeded its reasonable costs.

The fifth charge alleges that Acute made an unreasonable requirement for borrowers to purchase a repayment waiver when they took out a loan. The repayment waiver sold by Acute was subject to exclusions. The Commission says it was an unreasonable requirement to require the borrowers that were subject to the coverage exclusions to buy the repayment waiver, as they would not receive the full benefit of the waiver if they needed it.

As this matter is before the Court, the Commission cannot comment further at this time.

Background

The Christchurch-based finance company specialised in small personal loans and the charges focus on 67 loan contracts entered into during the 2014 financial year.

Acute’s repayment waiver was subject to coverage exclusions such as if the debtors made claims from pre-existing conditions or illnesses, were over 65, were temporary/seasonal workers or were not full-time employees (including the unemployed).

In May this year the Supreme Court dismissed Motor Trade Finance Limited (MTF) and Sportzone Motorcycles Limited’s second and final appeal in the long-running credit fees case brought by the Commission. The ruling, upheld an earlier High Court and Court of Appeal judgments (in 2013 and 2015) that backed the Commission’s approach to assessing whether credit fees charged by lenders are reasonable as required by the CCCFA. You can read more in the media release.