Niche mortgage lenders were found to charge customers establishment fees in excess of $1,000, according to the study, released this week.
The report places the spotlight on vague fees, terms, and disclosure from non-bank lenders and the information provided on non-bank lenders' websites.
One lender was found to charge a $2000 and $5000 establishment fee, depending on the amount borrowed. Another charged a fixed “loan application fee” of $1,900. While a third lender had a range of fees between $500 and $2000.
The Commission said the lenders in question appeared to operate in “short-term lending to property investors” and “high-interest lending to undischarged bankrupts”, but did not name the offenders.
The Commission’s report reviewed the websites of 215 non-bank lenders between May and December last year. The review included a range of consumer-facing lenders, from high-interest payday lenders to mortgage providers. Banks were not included in the Commerce Commission’s report, as a separate review of banks' websites is currently being conducted.
The wider report reveals poor disclosure from the non-bank lenders. A total of 21% failed to comply with their obligation to prominently display costs of borrowing, terms, and cancellation rights, the Commission said.
Commissioner Anna Rawlings said she had contacted each of the 215 non-bank lenders reviewed to “remind them of their responsibilities”. She added: “While most lenders have shown a willingness to make changes, we will be checking back later in the year and will consider further action if they have failed to comply.”
Rawlings added: “Overall, this review provides a good insight into the information being provided to consumers and some of the difficulties consumers may face in trying to access and understand the true costs of borrowing, comparing lenders, and making informed borrowing decisions.”
