KEY POINTS:
Geneva Finance has refunded customers more than $500,000 after admitting it breached the law by not providing rebates on insurance when some debtors paid loans early.
The company made an out-of-court settlement with the Commerce Commission to refund $510,966 to 3700 customers, after breaching the Credit Contracts and Consumer Finance Act.
The finance company had not provided rebates on payment protection insurance premiums for loans repaid between April 2005 and December 2007, the commission said.
Those insurance policies ensure that repayments will be made if debtors are unable to meet them for reasons including accident, sickness or redundancy.
During the period, about 24,000 loans were repaid early or terminated by Geneva Finance, of which about 3700 did not receive the correct rebate.
Geneva Finance had been cooperative and provided rebates when the issue was identified, said commission chairwoman Paula Rebstock.
"Many consumer finance companies require customers to take out payment protection insurance. The commissions from those policies represent a source of revenue to the finance companies.
"When customers wish to repay their loans early they rely on creditors to calculate the correct settlement balance, including any rebates due to them. We expect others in the industry to ensure that they are not making the same mistakes Geneva Finance made," Rebstock said.
Geneva also settled out of court with the commission last October over breaches of the Fair Trading Act and refunded $589,114 to over 900 debtors who had been overcharged fees and interest.
Geneva froze repayments to its investors for six months in November after defaulting on debenture payments and winning a debt moratorium.
Its reconstruction plan will repay investors with interest and convert a proportion of debenture and subordinated note holdings into shares.
Bank of Scotland, which is owed $43 million, will be repaid $8m over five months to September, with the balance to be rescheduled as a term loan.
Geneva is going to list on the NZAX, when 15 per cent of debenture-holders and 55 per cent of subordinated note-holders' investments will be converted into ordinary shares.
- NZPA
