Pretty Penny Loans under investigation for high-interest rates and lending behaviour

Another short-term lending company is under the microscope over its high-interest rates and lending behaviour.  

The Commerce Commission has revealed it's investigating Pretty Penny loans a week after launching legal action against Moola. 

Last year when Tina needed to buy a car, she borrowed $200 from Pretty Penny Loans.

She never thought she would pay the company back more than double over 11 weeks.

"$464.22, and I also paid $25 in direct debit fees," Tina told Newshub.

That total also included $110 worth of start-up fees. On top of that, a daily compounding interest rate of 1 percent. 

"I've found them really frustrating to deal with. It's really stressed me out," says Tina.

Tina is a beneficiary and says the process was just too easy. 

"That's the biggest problem because I don't have to leave my room it's all done online. It's just a matter of clicking this, clicking that."

So easy in fact, that Pretty Penny Loans promotes a quick application process.

They say it takes "two minutes to apply", with cash in your account "within two hours". 

There are no shopfronts, and everything is done online.

The company also offers the unemployed the option of making repayments with "the help of your work and income benefits".

"I Googled loans for people with bad credit and low-income earners, and this is what came up for me," says Tina.

Community Law says unfortunately, desperate people do desperate things. 

"It is shocking. I don't think that taxpayers expect WINZ payments are going to be used to pay interest to loan sharks, quite frankly," says Sue Moroney, 

Pretty Penny advertises a 1 percent daily interest rate and an annual interest rate of 365 percent. 

If someone takes out a $200 loan (plus the $88 set-up fee for a first-time borrower) and manages to make every weekly repayment, they could end up paying back $389.29 over eight weeks. Over a year, that's $1112.83 to pay back.

There's also a raft of other fees in this loan agreement that borrowers could be slapped with. 

The same-day deposit Pretty Penny advertise will cost $12, as will a priority transfer. An extension of the first payment costs $20, a change of payment costs $10 and a default on the debt is $13. All of these additional costs are also subject to interest. 

However, Pretty Penny's website says its services should only be used for short-term lending.

"What we see in Community Law is people taking out short-term loans and then very quickly having to take another loan to pay that loan back," says Moroney.

"And then another loan to pay that one back, and before they know it, they've got into this spiral they just can't get out of."

Even if that does happen, Pretty Penny will still try to entice customers into taking out another loan. 

"I would receive emails, letters... text messages," says Tina.

A select committee is currently considering a bill to crack down on loan sharks, but there's  concern it doesn't go far enough. 

"We want to see an interest rate cap put on that bill, but we are also interested in ensuring that beneficiaries can't have attachment orders made against their benefit as well," says Moroney.

The Commerce Commission has received 59 complaints about Pretty Penny Loans since 2016, and is now investigating the accusations. 

Newshub tried to contact Pretty Penny Loans several times but has received no response so far.

However, what they do say on their website is:

"Responsible lending is one of the most important Pretty Penny policy areas.

"It is [their] mission to assist customers without ever causing them to end up in a worse financial position."