Auckland lender Budget Loans, and its sister company Evolution Finance, have been fined $720,000 for "cynical and deliberate" repossession tactics.

"In some cases Budget Loans stripped houses almost bare," according to the Commerce Commission, which took the case.

In some cases, Budget Loans had no right to repossess items, many of which the commission said ended up in the dump.

The companies are headed by sole director Allan Hawkins, who was jailed in 1992 after being found guilty of fraud involving Equiticorp.

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As well as the fine, the lenders must pay a total of $53,000 emotional harm reparations to nine victims, and about $38,000 in refunds and credits to borrowers.

SUPPLIED Mary-Anne Borrowdale, the Commerce Commission's general counsel said: "The financial and emotional distress caused by this conduct to borrowers and their families should not be underestimated."

The case involved 125 charges under the Fair Trading Act

The commission's lawyer, Mary-Anne Borrowdale said from 2009 to 2014 Budget Loans "misrepresented its right to repossess goods, and recover interest and costs from borrowers".

It also misrepresented amounts borrowers were required to pay.

The loans involved were a hangover from the great finance company collapses of the mid to late 2000s.



Budget Loans bought the distressed loans of Western Bay Finance and National Finance in 2004. They both specialised in car loans, including borrowers with poor credit histories.



"The court acknowledged today that Budget Loans attempted to create cash flow by getting Western Bay and National Finance borrowers to pay as much as possible for as long as possible.

"It continually added costs and interests to loans and then repossessed essential goods from borrowers without notice when they couldn't pay, regardless of whether it was legally entitled to do so," Borrowdale said.



The costs of the repossession were, for the most part, higher than the value of the goods and sometimes Budget Loans simply threw repossessed goods away rather than selling them, she said.

The companies also obtained court judgments against some borrowers, but continued to add interest and costs, and demand more from borrowers than the courts had awarded.



Where loans were not secured Budget Loans sought to convince some borrowers to sign new, secured loans by telling them that they would get a discount on their loan balance. However, the amount of the discounted loan was higher than the amount the borrower was actually required to pay.



"Budget Loans' conduct and misrepresentations kept vulnerable borrowers in a cycle of debt and repossession. It knowingly engaged in illegal repossessions of essential items from people that it knew were already living in hardship. The financial and emotional distress caused by this conduct to borrowers and their families should not be underestimated," said Borrowdale.





"Its own loan notes include such comments as 'someone's great idea to undertake an illegal repo' and 'debtor not to know we can't repo'."

Judge David Sharp said it was "cynical and deliberate" offending.

He said the repossessions were "reprehensible" and were "used as a direct means of coercion."



Some of the charges were for adding interest and costs to a loan balance after repossession, when that is not allowed under the Credit Repossession Act.



"One borrower declared herself bankrupt when told her loan had ballooned from about $9000 to $57,000. In fact she had less than $2500 to pay at that time," Borrowdale said.



"We are very pleased with the result. These were particularly serious breaches of the Fair Trading Act. Lenders must not misrepresent their rights under loan contracts and they must act within the law.

"They cannot require borrowers to pay amounts and extra costs they do not owe, as happened time and time again with Budget Loans." said Borrowdale.



The commission was seeking banning orders against Hawkins, and his son Wayne Robert Hawkins, who were the directors of the company during the relevant period.