Shoppers to get back $3m interest

[Lux]

By ROELAND van den BERGH - The Dominion Post | Saturday, 15 November 2008


GE Money will repay more than $3 million to thousands of customers who were wrongly charged interest on an "interest-free" hire purchase promotion.
The financial giant reached an out-of-court settlement with the Commerce Commission after it admitted breaching the Fair Trading Act by misleading some customers that it was entitled to charge interest during the interest-free period.
About 3610 customers are to be repaid a total of about $3.1 million.
Commerce Commission chairwoman Paula Rebstock said interest-free deals were attractive to people wanting to make big-ticket purchases.
"Retailers and finance companies have an obligation to ensure that, if finance is offered as interest- free, it truly is,"
Noel Leeming and Bond and Bond stores ran the "pay nothing until July/August 2007" promotion s between late October 2005 and February 2006.
Finance was provided by Pacific Retail Services, which was bought by GE Money in February 2006.
Customers were offered a three-year finance deal. No interest was to be charged and no repayments were required for 17 months.
After that, the loan was to be repaid by instalments, with interest calculated from the date of the purchase.
This was despite the loan contract specifying the interest-free period and that interest would be charged from the time the interest free period ended.
Customers who tried to repay their loans soon after the interest free period ended were charged hundreds of dollars in accrued interest.
GE Money is to recalculate the loans of all affected customers and provide credits or refunds by the middle of next month.
It will also pay interest at 7.15 per cent on the amounts overpaid.
The company's New Zealand managing director, Greg White, apologised "unreservedly to all customers affected".
"GE Money was not involved with the product's promotion and there was no intention to mislead anyone."
The type of hire-purchase agreements involved were withdrawn from sale in August 2006 because they could be "difficult to understand" and did not fit well with other lending products, Mr White said.
GE Money offers a credit card-style loan for retail lending which can include interest-free periods and deferred-payment options.
The company announced last month that it was pulling out of home lending and car financing in New Zealand with the loss of 80 jobs, but would continue financing retail consumer goods.