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Successful first prosecution under CCCF Act

Successful first prosecution under CCCF Act

In the first prosecution under the Credit Contracts and Consumer Finance Act, Senate Finance Limited, which provides finance to the customers of car dealers, has been fined $59,000 for giving customers terms and conditions they could not read. Seventeen affected customers were also awarded a total of $13,700 in statutory damages.

The company pleaded guilty to 17 breaches of the CCCF Act, for not adequately disclosing the terms and conditions of its loans.

Failing to properly disclose the terms and conditions meant the contracts were unenforceable, and Senate Finance also pleaded guilty to a further eight charges of breaching the Fair Trading Act when it told a customer the contracts were enforceable.

Commerce Commission General Manager Geoff Thorn welcomed the penalties and said that ensuring consumer finance companies provide adequate disclosure had been an important focus for the Commission since it started enforcing the CCCF Act in May 2005.

"With no limits on the interest that can be charged, it is essential that consumers understand what they are committing to when entering any credit agreement, which is why the disclosure requirements are written into the legislation. The right to cancel their contract is a key part of the disclosure requirements," said Mr Thorn, "and if there is a lack of transparency around this right, the relationship between lenders and borrowers is jeopardised.

The Auckland District Court found that documents Senate Finance provided had been faxed and photocopied, and in some instances were so distorted that they were impossible to read.

This breached the CCCF Act, which requires that certain information is disclosed to debtors once they have entered into a loan contract.

Seventeen customers who bought cars from one South Auckland car yard were found to have received illegible documents from Senate during the period 25 April 2005 and 2 November 2005.

In one instance, a car salesman at the car yard told a customer to "use a magnifying glass" if he was having trouble reading the document.

"The penalties handed down by the Courts in this prosecution send a very clear signal to all finance companies that, to meet the disclosure requirements of the Act, documents must be legible," said Mr Thorn. "If the customer can not read the disclosure, the contract may not be enforceable and any claims that the contract is enforceable, such as sending default notices or taking repossession action, can be a breach of the Fair Trading Act.

"The Fair Trading Act and the CCCF Act set high expectations of standards of behaviour for lenders and the Commission will actively pursue any breaches of these standards," said Mr Thorn. "This first successful prosecution should leave the credit industry in no doubt as to its obligations to consumers in this area."


Under section 17 of the CCCF Act, every creditor under a consumer credit contract must ensure that key information (as set out in schedule 1 of the CCCF Act) that is particular to the credit contract is disclosed to the debtor either before the contract is made or within five working days of the day on which the contract is made. The key information includes the debtor's right to cancel the contract.

Senate Finance is a subsidiary of Dorchester Pacific Group.


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