Harmoney’s
peer-to-peer lending is under investigation by the Commerce Commission for
potential breaches of credit contracts legislation.
Harmoney challenged
Commerce Commission requests for a High Court ruling over legal interpretation of
peer-to-peer lending saying this was a disguised substitute for a potential
prosecution. Harmoney was prejudiced
because any court hearing would not cover the full facts, it said. Justice Courtney ruled the High Court enquiry
could look at who were the parties to any peer-to-peer credit contract and
whether the “platform fee” received by Harmoney is a credit fee governed by the
Credit Contracts and Consumer Finance Act.
Peer-to-peer lending is
currently regulated by the Financial Markets Conduct Act. This serves to protect investors putting up
the cash; not borrowers receiving peer-to-peer loans. Investors register online and deposit cash
into a trust account controlled by Harmoney.
Borrowers also register online.
They are assigned an interest rate after an assessment of their
individual risk profile. Investors
nominate which borrowers they will support.
When an order is filled, investor funds are packaged together and
transferred to a trustee for delivery to the borrower. A “platform fee” is deducted by the trustee
and paid to Harmoney before handing over the balance to the borrower.
The Commerce Commission
is seeking to identify, as a matter of law, who is the creditor making the loan
in peer-to-peer lending. Creditors must
comply with credit contracts legislation.
Commerce
Commission v. Harmoney Ltd – High Court (31.05.17)
17.059