Published 24 March 2008
The Commerce Commission said on Thursday consumer finance company Lelei Finance Ltd, which lends almost exclusively to the Tongan community, had been fined $37,480 in the Manukau District Court for breaches of the Credit Contracts & Consumer Finance Act and Fair Trading Act.
The penalty was a long time coming: The commission said it had warned Lelei in 2005 but campaign group Global Peace & Justice Auckland had already highlighted Lelei’s practices in December 2004 and the point was made again in Government research in 2006.
Lelei Finance (Ilaiasi Lelei Ufi, Mangere), incorporated on 22 November 2004 & based in Otahuhu, pleaded guilty to 18 breaches of the CCCF Act & 2 breaches of the Fair Trading Act following a commission investigation. It has also been ordered to refund $12,520 to affected debtors.
Commission chairman Paula Rebstock said Lelei Finance provided short-term loans of between $20 & $5000, often using traditional woven Tongan floor mats & tapa cloths as security.
She said the company had been made aware of its responsibilities under the 2 acts in 2005 but had made no effort to comply with them. The company even published personal details of alleged defaulters in a Tongan-language newspaper, although the contracts weren’t enforceable.
Global Peace & Justice Auckland (Mike Treen, John Minto & Geraldene Peters) highlighted Lelei’s practices – including photos of alleged defaulters in a Tongan-language newspaper – in December 2004.
And a Consumer Affairs Ministry study on fringe lenders highlighted its treatment of alleged defaulters in 2006.
Between 1 June-30 November 2006, Lelei Finance failed to provide initial disclosure (required under the CCCF Act) in 616 consumer credit contracts. The contracts provided to debtors didn’t include required information about what the annual interest rate was, how interest was calculated, the debtor’s right to repay early and the debtor’s right to cancel the contract within 3 days.
The company also made false & misleading representations regarding its right to enforce the contracts in default letters and sold security items held for 27 contracts, when the credit contracts could not be enforced as correct disclosure had not been made. Lelei Finance also published photographs & personal details of at least 4 debtors in a local Tongan newspaper claiming these debtors had defaulted on loans that were in fact unenforceable.
Ms Rebstock said the breaches of the 2 acts were serious, particularly given the vulnerability of the affected debtors: “About 98% of debtors to Lelei Finance are of Tongan descent and for the majority of them English is their second language.
“Any debtor needs to have all the information relevant to their borrowing, in order to make a wise & informed decision. The fact that these debtors had limited options for borrowing, and limited understanding due to language difficulties, makes the offending all the more serious.
“It is not acceptable for fringe lenders to ignore their responsibilities under the law. The commission was concerned by the apparently poor level of compliance amongst those providing personal lending to the Pacific Island community.”
Last August, the commission warned 6 lenders operating predominantly in the Pacific Island communities for allegedly failing to provide adequate disclosure to customers taking out personal loans. Since then, the commission has been working with lenders and has noticed an increase in compliance with the Credit Contracts & Consumer Finance Act.
Mr Ufi is also sole director & shareholder of Lelei Property Ltd & Lelei Property Investments Ltd.
17 August 2007: 6 South Auckland lenders warned, one to be prosecuted
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Attribution: Commission release, story written by Bob Dey for The Bob Dey Property Report.