Harmoney will pay out $7 million to 37,000 users of its platform. Photo / File
Harmoney will pay out $7 million to 37,000 users of its platform. Photo / File
Online lender Harmoney is to repay $7 million to 37,000 customers in a settlement agreement with the Commerce Commission after admitting its platform fees were unreasonable.
The commission launched legal action against Harmoney in 2016 alleging its loan establishment fee was actually a credit fee and exceeded the amount of reasonable costs under the Credit Contracts and Consumer Finance Act 2003.
The case was due to go to the High Court next month but has now been settled out of court.
In a statement, the commission said since it started business in August 2014, Harmoney had charged borrowers a "platform fee" that it added to loans arranged through its platform.
The nature and amount of the platform fee had changed several times since Harmoney began trading; it was initially a percentage-based fee of up to $1500 and was changed to a fixed fee of up to $500.
As part of its settlement with the commission, Harmoney has admitted that its platform fee was an unreasonable establishment fee. Harmoney has agreed to charge no more than $165 for any establishment fee on new consumer loans for the next five years.
Harmoney will repay borrowers who were overcharged on loans entered into between August 26, 2014 and August 25, 2021, and will be contacting affected borrowers as part of the settlement. The commission said it might take up to two years to complete this process.
Commerce Commission chair Anna Rawlings said the settlement related to legal proceedings that started in 2016, when the commission filed its initial High Court action seeking clarity about how the CCCFA applies to Harmoney's loans and fees.
"Following the Court of Appeal's confirmation in 2020 that Harmoney's loans are consumer credit contracts that are subject to the CCCFA, Harmoney has now admitted that the platform fees it charged were unreasonable and it will provide compensation for borrowers who took out relevant loans."
It would now seek High Court declarations that Harmoney contravened section 41 of the CCCFA by charging unreasonable fees. Harmoney has agreed not to oppose the Commission's application.
Harmoney chief executive David Stevens. Photo / File
Harmoney chief executive David Stevens said it was pleased to reach an outcome that allowed the company to put the matter behind it. The company was no longer offering peer-to-peer lending and only offered loans that were back by its term facilities.
Stevens said the establishment fee rebate had been fully provisioned for in the company's FY21 financial statements which would be lodged with the ASX/NZX on August 31.
"The company had recognised a $3 million provision as at 30 June 2020 and has increased this provision by $4 million in its FY21 financial statements.
"The company will use its best endeavours to contact all eligible borrowers and provide details on how they may access their establishment fee rebate."
