An Auckland-based car finance company has pleaded guilty to breaching the Credit Contracts and Consumer Finance Act (CCCF Act) and the Fair Trading Act in relation to car loan contracts. Dolbak Finance Limited has been fined a total of $2000 in the Auckland District Court yesterday.
A Commerce Commission investigation found that Dolbak Finance Limited’s car financing contracts did not comply with the CCCF Act, as they did not accurately disclose the annual interest rate charged on the loans. The Commission’s investigation also found that in relation to contracts entered before April 2007, Dolbak Finance Limited misrepresented its right to enforce the terms of the contracts which is a breach of the Fair Trading Act.
Dolbak Finance Limited is a small financier operating in the car finance industry. It was incorporated in 2006 having originally traded as a partnership called Dolbak Finance.
In 2007, the Commerce Commission prosecuted the partners in Dolbak Finance, Anthony Baker and David Dolbel for breaches of both the CCCF and Fair Trading Acts, for failure to provide initial disclosure in relation to 99 customers who had taken out car loans. Both partners pleaded guilty to 22 charges each and were convicted and fined. Under the CCCF Act contracts cannot be enforced until initial disclosure requirements have been met. However, Dolbak Finance Limited, which took over the car loan contracts from Dolbak Finance in April 2007, did not correct the lack of disclosure and took action to enforce the contracts of 14 of the affected customers, including issuing repossession notices and proceedings to collect payments. The affected customers included those for whom Dolbak Finance was originally convicted.
“While these are different charges from those to which Mr Baker and Mr Dolbel pleaded guilty in 2007, it is disappointing that Dolbak Finance Limited still did not understand its obligations under the legislation. Although the credit contracts were rewritten after the 2007 prosecution there were insufficient procedures in place to ensure that the interest rate was accurately disclosed,” said Graham Gill , Commerce Commission Enforcement Manager, Auckland .
“Consumers need to be able to accurately assess the total cost of credit so that they can make comparisons with other credit options and make informed decisions,” said Mr Gill. “It is also important for creditors to appreciate that they must always rectify errors in disclosure before looking to enforce contracts. Dolbak Finance Limited did not take those steps following the 2007 convictions,” said Mr Gill.
“During the Commission’s investigation Dolbak Finance Limited withdrew all legal action against affected customers and also refunded or credited any customers who were overcharged as a result of the incorrect interest calculation. Dolbak Finance Limited has also provided the Commission with significant undertakings to ensure ongoing compliance with the legislation in the future,” said Mr Gill.
“All those involved in the finance industry should take seriously the responsibility of running a compliant business and seek independent advice to ensure that their lending practices do not breach the relevant consumer legislation or they risk facing penalties, including banning orders from the courts,” said Mr Gill.
In sentencing, Judge Cunningham noted that the level of fine in this case should not be taken as precedent by other creditors, as it took into account the particular circumstances of the creditor’s situation, in that they are still paying off the original fines. Judge Cunningham also noted that further breaches would not be tolerated.
“The company is well aware that if they are found to be in breach of either the CCCF or Fair Trading Acts again, the Commission will seek to have the company and its officers banned from the industry,” said Mr Gill.