Online lender Moola admits failure to behave as a responsible lender
Published06 Oct 2021
Christchurch based online lender Moola.co.nz Limited has entered into a settlement with the Commerce Commission, admitting that it failed to comply with the Credit Contracts and Consumer Finance Act’s lender responsibility principles.
Moola provides high cost short term loans of up to $5,000 through the Moola.co.nz and needcashtoday.co.nz websites.
In relation to loans provided to 50 borrowers between 6 June 2015 and 30 November 2017, Moola has admitted that it failed to make reasonable inquiries to satisfy itself that it was likely that its loans met borrowers’ requirements and objectives, and that borrowers would be able to make repayments without suffering substantial hardship.
It required borrowers to choose from a finite list of options when stating the reason for taking out a loan, including ‘other’. It did not follow up to require additional information from those who selected ‘other’. Applicants had no ability to provide a full description of the reason for the loan. Moola did not consider the purpose of the loan when determining whether to advance the loan for some borrowers and some borrowers seeking a top loan were not required to state the purpose for their loan at all.
Moola relied solely on bank transaction data provided by prospective borrowers to determine whether they were likely to make loan repayments without undue difficulty. For example, Moola used income ratios to assess affordability, rather than assessments of a borrower’s actual expenses against their income. Borrowers were not asked to specify their actual expenditure and additional checks which may have provided additional relevant information were not carried out.
In addition, Moola admitted that it failed to exercise the care, diligence, and skill of a responsible lender in advertisements for high cost loans when it engaged in direct advertising offering additional loans, and that its methods of contacting defaulting borrowers breached its obligations to treat borrowers reasonably and in an ethical manner.
Moola has agreed to refund the interest and fees paid by the 50 borrowers.
“Moola failed in its responsibilities to help ensure that loans meet borrowers’ needs and can be repaid without substantial hardship,” said Commerce Commission Chair Anna Rawlings.
“These are important borrower protections and Moola has undertaken to implement systems, processes, policies and training to help it to meet its responsible lending obligations in future.”
“From 1 December 2021, new regulations will require lenders to make additional, specific inquiries about borrowers’ needs and objectives, as well as their income and expenses to help ensure that loans are suitable and affordable. We urge all lenders to familiarise themselves with those requirements and ensure that they have processes in place to assist them to comply”.
The complete settlement agreement between the Commission and Moola, together with the undertakings, are available on the Commission’s website.
Moola provides personal loans through two websites. It is based in Christchurch but has no retail offices or branches. During the period from 6 June 2015 to 30 November 2017, Moola provided high cost short and mid-term loans having annualised interest rates of up to 547.5%.
Section 9C of the CCCF Act requires lenders to exercise the care, diligence and skill of a responsible lender, which includes obligations to make reasonable inquiries about a borrower’s requirements and objectives and the borrower’s ability to repay the loan without suffering substantial hardship, to take care to advertise loans responsibly, and to treat a borrower reasonably and in an ethical manner when a loan agreement is breached.
Further information about the new suitability and affordability obligations coming into force on 1 December 2021 and a copy of the amendment regulations is available on the Commission's website.
The Commission may accept a written undertaking given by a person or business in connection with any matter relating to the enforcement of the CCCF Act. If any term of the understanding is breached, the Commission can apply to the court to enforce the undertaking, including applying for an order requiring compliance with it.