Since it started business in August 2014, Harmoney has charged borrowers a ‘platform fee’ that it added to loans arranged through its platform. The nature and amount of the platform fee has changed several times since Harmoney began trading; it was initially a percentage-based fee of up to $1,500 and was changed to a fixed fee of up to $500.

The Credit Contracts and Consumer Finance Act (CCCFA) requires that fees must be reasonable and cannot exceed the lender’s transaction-specific costs. As part of its settlement with the Commission, Harmoney has admitted that its platform fee was an unreasonable establishment fee. Harmoney has agreed to charge no more than $165 for any establishment fee on new consumer loans for the next five years.

Harmoney will repay a total of $7m to approximately 37,000 borrowers it over-charged on loans entered into between 26 August 2014 and 25 August 2021, and will be contacting affected borrowers as part of the settlement. It may take up to two years to complete this process.

The Commission will now seek High Court declarations that Harmoney contravened section 41 of the CCCFA by charging unreasonable fees.  Harmoney has agreed not to oppose the Commission’s application.  “This settlement relates to legal proceedings that started in 2016, when the Commission filed its initial High Court action seeking clarity about how the CCCFA applies to Harmoney’s loans and fees,” said Commerce Commission Chair Anna Rawlings.  “Following the Court of Appeal’s confirmation in 2020 that Harmoney’s loans are consumer credit contracts that are subject to the CCCFA, Harmoney has now admitted that the platform fees it charged were unreasonable and it will provide compensation for borrowers who took out relevant loans,” said Ms Rawlings.

Background

Harmoney is an online lender that operates in New Zealand and Australia. In August 2016, the Commission asked the High Court to clarify how the CCCFA applies to the platform fee and to consumer loans entered into on Harmoney’s platform. In a judgment issued on 8 July 2020 the Court of Appeal confirmed that Harmoney is a creditor, its contracts are consumer credit contracts which are subject to the requirements of the CCCFA, and its platform fee is therefore a credit fee that is required by the CCCFA to be reasonable.

In August 2017, while awaiting the outcome of the earlier proceedings, the Commission filed enforcement proceedings against Harmoney in respect of the reasonableness of its platform fees.

Other unreasonable fee cases

The Commission has investigated a number of lenders in relation to unreasonable fees.

Recent cases include:

  • UDC settlement with Commission on unreasonable fees
  • Online lender Moola in $2.8m settlement with Commission over fees
  • Auto Finance Direct agreed to return approximately $460,000 in fees to borrowers
  • Acute Finance was fined $22,000 and returned $10,000 to borrowers
  • Cash to You Loans was banned from lending for offending which included charging unreasonable fees
  • Rapid Loans agreed to compensate borrowers $1.4 million

Unreasonable fees

In May 2016 the Supreme Court ruled that fees under consumer credit contracts cannot be used to generate profits or to recover costs that are not closely connected to the matter giving rise to the fee.