Online lender Moola to pay back almost $3 million to borrowers over unreasonable fees

March 3, 2021
The company charges interest rates as high as almost 550 per cent.

Online lender Moola will be paying back $2.8 million to current and former borrowers after a Commerce Commission investigation into its fees.

The high cost short term lender has agreed to a settlement with the commission where it is required to credit or refund customers.

Before the introduction of a daily rate of charge cap in June last year, Moola offered loans with interest rates as high as 620.5 per cent per annum.

However, after receiving complaints, including from a Christchurch budget advisory service, the Commerce Commission came in to investigate.

In September 2017, the District Court raised concerns about the level of Moola’s fees and invited the Commission to intervene in debt recovery proceedings taken by Moola.

The Commission found that between February 2016 and July 2017, Moola was likely to have charged unreasonable credit and default fees, breaching the Credit Contracts and Consumer Finance Act 2003.

During the investigation, the lender charged default fees of $60 where the reasonable fee as calculated by the Commission was from $10.24 to $15.66, as well as establishment fees of $150 or $350 depending on the term of the loan, where the reasonable fee as calculated by the Commission was either $4.47 or $5.48.

The lender also charged processing fees of $50 where the reasonable fee as calculated by the Commission was either $10.86 or $12.25.

Commission Chair Anna Rawlings said fees must recover costs that are "relevant and closely connected to the activity for which the fee is charged".

She said it was the Commission’s view that Moola’s fees recovered more than those costs.

"We consider that during the relevant period, Moola’s default fee, establishment fee and processing fee recovered costs that were not closely related to the matter for which the fees were being charged, as required by the CCCFA.

"Moola acknowledges our view and has undertaken to credit or refund affected customers the difference between the fee charged and the fee we calculated was a reasonable fee."

Due to Covid-19, Moola has been allowed six months to calculate refunds owed to its borrowers.

Affected customers will be refunded within 12 months.

Moola also agreed to publish information about the agreement on its website so that anyone who had a loan with them between February 2016 and July 2017 can check there for more information.

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