Mainland Finance has agreed with the Commission that between 1 April 2015 and 30 March 2019 its consumer credit contracts with borrowers breached the Credit Contracts and Consumer Finance Act (CCCF Act) by providing for unreasonable fees. These fees were:

  • establishment fees of between $495 and $595 per new loan, and between $95 and $295 per top-up loan
  • an administration fee of $5 per week, and
  • 11 different types of default fee.

“The CCCF Act requires credit fees to be reasonable and they should only recover costs that are closely related to the matter for which the fees are being charged,” said Commission Chair Anna Rawlings.

“In this case, following a Commission investigation, Mainland Finance has accepted the establishment, administration and default fees in relation to around 2,000 loan contracts exceeded the reasonable costs associated with the matters giving rise to those fees, and it has agreed to compensate borrowers for their loss.”

As part of the settlement, Mainland Finance has provided the Commission with enforceable undertakings which explain how it will find and remediate borrowers who were charged the unreasonable fees. Payments to borrowers have been calculated based on the difference between the fees that were actually charged to them and the Commission’s estimate of the reasonable costs that could be recovered under those categories of fees.

The total amount to be paid to customers is approximately $1.1million ($366,500 in establishment fees, $489,600 in administration fees and $249,600 in default fees).

A copy of the settlement agreement and enforceable undertakings can be found on the Commission’s website.

Background

Mainland Finance

Mainland Finance Limited is a finance company offering loans to borrowers for the purchase of used vehicles.

Unreasonable fees

In May 2016 the Supreme Court ruled that fees under consumer credit contracts cannot be used to generate profits or to recover business costs that are not closely connected to the matter giving rise to the fee. Lenders must recover their profit and any costs not allowed by the fees provisions from interest charges or charges for optional services.