Consumer lender Harmoney to repay $7 million to around 37,000 customers for unreasonable fees

Consumer lender Harmoney will compensate borrowers for unreasonable platform fees charged between 2014 and 2021.
Consumer lender Harmoney will compensate borrowers for unreasonable platform fees charged between 2014 and 2021. Photo credit: GettyImages.

Consumer lender Harmoney has agreed to repay a total of $7 million to around 37,000 customers after admitting unreasonable fees charged for loans arranged through its platform.

In a statement released on Friday, the Commerce Commission said it had reached a settlement agreement with Harmoney (Harmoney Limited and Harmoney Investor Trustee Limited). 

The company said it will compensate borrowers for unreasonable platform fees charged for loans taken out from August 26, 2014 to August 25, 2021.  

As part of the settlement, Harmoney has agreed to charge no more than $165 for any establishment fee on new consumer loans for the next five years.

Since starting business in August 2014, Harmoney charged borrowers a "platform fee" that it added to loans arranged through its platform. 

Since that time, the nature and amount of the platform fee changed several times, the Commerce Commission said.  It started as a percentage-based fee up to $1500, later changing to a fixed fee of up to $500.

Commerce Commission chair Anna Rawlings said the settlement relates to legal proceedings that started in 2016. The Commission filed its initial High Court action seeking clarity around how the Credit Contracts and Consumer Finance Act (CCCFA) applied 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," Rawlings said.

As a credit fee, the platform fee must be reasonable. Under CCCFA rules, fees can't be used to generate profits or recover unrelated costs.

The Commerce Commission 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.

Affected customers will be contacted. The Commerce Commission expects the process could take up to two years to complete.

Founded by Neil Roberts in late 2013, Harmoney provides unsecured personal loans of up to $70,000 throughout New Zealand and Australia.  

The Commerce Commission confirmed Harmoney was one of many lenders it had investigated over unreasonable fees. Earlier this year, Moola agreed to refund customers $2.8 million on unreasonable credit and default fees on loans taken between 2016 to 2017.  

Other lenders compensating customers include Auto Finance Direct, Acute Finance, and Rapid Loans. Napier lender, Cash To You Loans, was banned from lending indefinitely after the Commerce Commission found unreasonable fees, incorrect disclosure to borrowers and excess interest charged.  

For borrowers concerned about high fees and interest charges, among the community groups offering no or low-interest loans include Good Shepherd and Ngā Tāngata Microfinance. Free budgeting support is available through places like Christians Against Povery (CAP) and Money Talks.