In the Commission’s first such prosecution, Aotea West Auckland pleaded guilty to five representative charges under the Credit Contracts and Consumer Finance Act 2003 (CCCF Act) for offending which occurred between June 2015 and March 2016.

The CCCF Act prohibits lenders from using essential cooking and medical equipment, portable heaters, washing machines, refrigerators, beds and bedding, and critical identity and financial documents as security for loans, meaning that lenders cannot repossess these items if the borrower fails to make payments.

Aotea West Auckland took security interests over items such as beds, cooking equipment, washing machines and refrigerators. Of 52 sample contracts viewed by the Commission, 19 contracts showed a security interest unlawfully claimed over prohibited items.

“These goods are protected by law because, generally, they are worth more to borrowers than they are worth as security for loans. Lenders may not use the threat of repossession of these goods to encourage borrowers to pay,” said Commissioner Anna Rawlings. In sentencing in the Waitakere District Court on Friday 26 October, Judge June Jelas said “the legislation is designed to protect the vulnerable, and high standards are required of those who operate within it.”

She said she accepted “there was no repossession, or risk of repossession, given the lender’s policy, but by entering into the contract the borrowers, who were generally vulnerable, believed they were at risk of losing items that were of high value to them.”

Her Honour Judge Jelas said that the level of harm and stress that could be caused to borrowers by the offending is difficult to quantify, but that a high level of deterrence should be applied.

The Aotea Finance group of companies comprises five separately registered companies with a single group manager. All charges were against Aotea Finance (West Auckland) Limited only.

The court also ordered Aotea Finance to pay statutory damages totalling $4,515.41 to the 19 affected borrowers.


Repossession information for consumers

The Commission has published this information for consumers.

It includes a link to episode five of our animated consumer information series It’s All Good. As Aunty tells the repossession agent as he attempts take a heater, “you can’t take essential items. Last time I checked, heating was pretty essential.”

Media are welcome to include a link to this episode in online stories, but please ensure it is attributed to the Commission.

Purchase money security interest

The CCCF Act prohibits taking security over essential items, but does not prevent those consumer goods being subject to a purchase money security interest under the Personal Property Securities Act 1989. This means that where money borrowed was used to buy prohibited consumer goods, those goods will not be protected by the prohibition in Section 83ZN.