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Reasonable Fees

Caleb entered into a consumer credit contract in August 2016 to finance the purchase of a car. The car cost $6,590.00 and, including the lending fees, the loan totalled $8,412.60.

The original repayment scheme was $75.00 per week. The lender’s contract detailed a number of charges which would be charged in the event of defaults and the actions the lender took.

The charges included:

  • 36% per annum default interest
  • a default fee of $25.00 for missed or partial payments
  • $5.00 communication charges
  • $1.00 per day for any defaults until remedied
  • travel fees for any agent of the lender to visit Caleb and reasonable fuel costs.

Caleb’s payments continued until Christmas 2016. Caleb lost a benefit entitlement when his child turned 18. Without the extra income, he could not afford the loan repayments.


Caleb instructed a lawyer because he thought the lender was misapplying his sporadic payments and the loan balance was not decreasing. Caleb did not dispute that he owed money on the loan. 

The lender commenced repossession action sometime between February and March 2018. The lender added a number of charges to Caleb’s loan account due to the defaults. Those charges were:

  • 25 Missed payment fees equalling $750.00
  • seven letter fees equalling $275.00
  • further default fees equalling $306.00 and
  • miscellaneous fees equalling $1,781.36.

The lender added it was entitled to add the charges mentioned, in addition to the interest charges, due to the work it undertook to communicate with Caleb. The lender repossessed the vehicle and estimated it would be sold for $5,617.50

Caleb complained to FSCL about the fees charged by the lender.


We reviewed the correspondence between the parties and the relevant loan documentation. In addition, we considered the relevant legislation, the Credit Contracts and Consumer Finance Act 2003 (“the Act”).

Although Caleb did not specifically refer to the relevant provisions of the Act, our terms of reference allow us to take into account relevant law.  After reviewing the Act and the case of Sportzone Motorcycles Limited v Commerce Commission [2016] NZSC 53, we were of the view that a number of charges that had been applied to Caleb’s loan account were unlawful.

We reviewed each charge on Caleb’s account and in light of the evidence provided found the following charges could not be justified; the communication fee of $5.00, the default fee of $25.00, the default fee of $1.00 per day, the repossession notice fee of $50.00, the $20.00 letter fee and the debit journal fees.


After review of all the information, we recommended Caleb’s debt be reduced from $12,689.55 as at 24 July 2018 to $4,094.00 including the sale of the car.  After further consultation and evidence, this amount was increased to $5,111.22. Both parties agreed to this and the investigation was closed.

Insights for consumers

If you default on your scheduled payments, your lender is entitled to charge you a fee for doing so. However, if there are multiple fees it is necessary for your lender to ensure they keep accurate records of what work they do undertake and how this corresponds to the fee they are charging.

Insights for participants

If you are lending money and charging for unexpected events, ensure you are recording what work you are undertaking to ensure you can prove the charges are reasonable.