In a settlement reached with the Commerce Commission, Gilrose Finance Limited will return over $50,000 to 2,303 customers affected by breaches of the Credit Contract and Consumer Finance Act.

Gilrose Finance admits it failed to correctly rebate credit-related insurance to some clients who had paid back their loans early, and did not tell customers about default fees that would be charged if they missed payments.

Gilrose Finance provides finance to customers of a number of large New Zealand retailers.

"The Credit Contracts and Consumer Finance Act is very clear about what rebates customers should receive if they pay a loan off early," says the Commission's Auckland Fair Trading Manager, Graham Gill.

"The Act also requires disclosure of fees; that means customers must be told upfront about all fees they will be charged."

"Finance companies are in a position of trust and relatively small amounts of overcharging can be hard for borrowers to detect," says Mr Gill

"There is no excuse for finance companies to make these kinds of mistakes."

"Companies should not be overcharging and this settlement should be a lesson to others to ensure their systems are correct," says Mr Gill.

"Borrowers should also check the amounts they are charged when paying off their loans early and contact the Commission if they suspect any overcharging."

Mr Gill says that once the Commission began investigating, Gilrose Finance had moved quickly to change its practices and refund affected customers.

Under the agreement reached with the Commission, Gilrose Finance has revised all its credit contracts to fully disclose its default fees.

Background

Default fees. By not disclosing all default fees in their consumer credit contracts, Gilrose Finance breached section 17 of the CCCF Act.

Insurance Premiums. By not correctly rebate insurance premiums to customers who had paid back their loans early, Gilrose Finance breached section 51 of the CCCF Act. In a small number of cases, Gilrose Finance over-rebated customers. As part of the settlement, Gilrose Finance has agreed not to recover the premiums from the over rebated customers.

CCCF Act Credit Contracts and Consumer Finance Act - A general guide for the credit industry can be downloaded from the Commerce Commission's website under Consumer Credit.