A Fair Go investigation of high-cost online finance facilitator MyFi has revealed links to another high-cost lender that had agreed to stop lending and sharing customer data.
Pretty Penny Loans settled with the Commerce Commission in July, writing off loans and promising not to advertise for, invite or enter into consumer loans here, or provide information about borrowers to third parties.
Auckland mum Tracy Edmonds was turned down for last-minute lending by Pretty Penny the week before Christmas, but it passed her private details to Myfi, which then offered to arrange a $300 loan, saying she’d be charged five per cent interest plus Myfi fees on top.
Tracy was eager to sort out Christmas for her five-year-old son and took the money, then quickly fell foul of some very costly and questionable charges.
That five per cent interest was payable on a 44-day loan - so it would actually be like taking out a loan at about 42 per cent per annum interest.
That’s using a calculation that gives the APR - the annual percentage rate - basically the full cost of what has to be paid back expressed in a figure you can compare with other loans.
Including fees, Myfi was charging Tracy $528 for that $300 over six weeks - which works out at an APR of over 640 per cent.
“Oh wow, that’s not funny,” says Tracy when Fair Go explains this to her. She is hugely shocked and would never have borrowed at effectively 640 per cent annual interest.
If it happened today, Tracy would be protected by a new law, the Credit Contracts Legislation Amendment Act 2019. You can find a detailed set of guidelines here.
Under that law, Tracy would have been charged a maximum of $600 to borrow $300, including all charges – set-up fees, late fees, defaults and interest.
The effectively daily interest rate is also capped and any lender would have to prove it had checked Tracy could afford the loan - which she clearly could not at the time.
Myfi also added default fees when it should not have. These drove up the amount Tracy owed. The company proved impossible to reach on the phone as her debt mounted up to over $1200.
Myfi wiped what Tracy owed after Fair Go asked for some justifications. A Myfi staffer revealed that the business is being managed by Mark Swanepoel, a former Super Rugby player and Queensland resident.
Mr Swanepoel is also a former director of Myfi and is currently chief executive of Pretty Penny Loans.
In an statement to Fair Go, Mark Swanepoel earlier denied any current link between the companies as he railed against the attention his businesses have been attracting.
“Under the false veil of good intentions, the mainstream media and Commerce Commission push their own political agenda in support of big banks and large corporates," he said.
"The damage inflicted on everyday people is disgusting.
"There are thousands of Kiwis that will now have nowhere to turn to in a time of need.”
A Myfi staffer also revealed to Fair Go that as many as 100 other customers remain on its books in debt for high-cost loans.
The Commerce Commission is investigating Myfi.
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