Moola accused of irresponsible money-lending practises

Moola accused of irresponsible money-lending practises
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Short-term lender Moola is being accused of "preying on the vulnerable" after legal action was launched against it.

The Commerce Commission is taking Moola to court over an alleged breach of lender responsibility principles and has applied for an injunction preventing Moola from any new lending until it offers borrowers a better deal.

Tim Barnett is CEO of the Fincap Trust, the umbrella body for budget services in New Zealand, he says Moola's name comes up a fair bit. 

"Tens of thousands of people every year get these high-interest loans out and we're convinced the right questions aren't being asked."

Between June 2015 and November 2017 Moola offered loans with interest rates of 182.5 percent and 547.5 percent annually, depending on the term of the loan.

However, the commission claims Moola failed to inquire whether borrowers would be able to repay their loans without "substantial hardship", and did not treat borrowers reasonably and ethically when breaches of loan agreements occurred.

It also alleges Moola failed to ensure loan agreements were not oppressive and failed to ensure it did not induce borrowers into agreements by oppressive means.

The investigation into Moola's practice was spurred on by a referral from a budget advisory service in Christchurch. 

"They're doing inadequate checks," Christchurch Budget Services manager David Marra told Newshub.

"It's illegal to make a loan if it's going to put people into further financial difficulty and often that is exactly what is happening."

Marra says he's seeing the impact first-hand, where people often take out a loan of around $600.

"What happens then is very quickly they could have very quickly accumulated a $5000, $6000 or $7000 debt," he told Newshub.

In a statement, Moola says: "Our business practices continue to evolve, and we are confident that we are a best practice operator and socially responsible lender."

However, news of the lawsuit has outraged New Zealanders, who are supporting the commission's legal action.

"Preying on the vulnerable," one person told Newshub.

"I think it's fair. I think they should go to court. I think it's terrible to charge that rate," another said.

But high rates could soon be a thing of the past with Parliament considering a Bill that would introduce a 100 percent cap on total repayments of interest and fees.

Many believe the bill should be expanded to include caps on interest rates as well.