The fee, called a "deferred establishment fee" was a contractual mechanism adopted by Bluestone to cover the costs of early repayment of mortgages. This fee was up to 4% of the value of the mortgage if it was repaid before up to four years.
The Commerce Commission views the fee as unreasonable and in breach of the Credit Contracts and Consumer Finance Act 2003. It says the amount of the fee was more than the early repayment of a mortgage would cost Bluestone. It is treating this as a test case.
Bluestone claims it did not break even on loans on a cashflow basis until they had been in force for about 40 months and therefore the fees it charged couldn't be said to be gouging borrowers or generating excessive profits.
Justice John Priestley of the High Court in Auckland said Bluestone would only be entitled to a summary judgment against the commission if it could show the commission's case would inevitably fail and it hadn't done so.
While Bluestone may be able to satisfy a court its fee was reasonable, "such an issue cannot be decided in a summary fashion," Justice Priestly said. For the same reasons, the charges couldn't be struck out.
