The New Zealand Commerce Commission has filed criminal proceedings against two finance companies run by former 1980s high-flyer Allan Hawkins, claiming the lenders' debt recovery practices breached the Fair Trading Act.
In papers filed in the Auckland District Court, the commission said that the companies, Budget Loans and Evolution Finance, misled debtors by:
- repossessing or threatening to repossess property when they didn't have the right to do so;
- adding interest and costs to loans after property had been repossessed;
- telling debtors they had to make loan payments at a higher rate than that set by the court; and
- telling them they had a shorter time to remedy a loan default before their goods would be repossessed.
The finance companies were issued with a 'stop now' notice by the regulator in November last year while it conducted its investigation.
In 2010 Budget Loans admitted to 34 charges of breaching the Fair Trading Act by charging interest and fees after it had repossessed and sold items of security, BusinessDesk reported. The lender agreement to make substantial repayments and was fined $30,750.
The loans largely originated from a number of failed finance companies including National Finance, Western Bay Finance and Equality Finance, which Budget Loans and Evolution Finance purchased when they were subsidiaries of former NZAX-listed company Cynotech Holdings.
Hawkins, the former head of Equiticorp who was jailed in the 1990s for his role in the so-called H-fee scheme (a sham foreign exchange transactions in 1988) took control of Cynotech in 2010, and pulled his financial support last year, leading to the company's liquidation and delisting.