Tuesday 27th July 2010
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Allan Hawkins’ Budget Loans, a subsidiary of Cynotech Holdings that took on the National Finance 2000 loan book, has pleaded guilty for misleading investors.
The firm was fined $30,750 in the Auckland District Court after it charged $15 to debtors when it sent out a ‘welcome letter’ saying their National Finance loans had changed hands, the Commerce Commission said.
Budget Loans agreed to reverse or refund the remaining $100,000 of the approximately $500,000 of overcharged interest and fees, and also refunded an additional $571,000 to its debtors in relation to credit fees that weren’t the subject of the current charges. The court recognised the reparation in setting the fine.
“The $15 ‘welcome letter’ fee was not disclosed before it was charged and Budget Loans therefore misled debtors by representing that it was entitled to charge the fee, when it was not,” Graham Gill, Auckland enforcement manager, said in a statement.
In March, former 1980s high-flyer Hawkins succeeded in his tilt to take over Cynotech, securing 78% of the company, though he fell short of the 90% target that would’ve let him force out the remaining shareholders and take the company off the NZX.
Cynotech posted a $2.7 million loss in the 15 months ended March 31 as it increased its provisioning for bad debts.
Cynotech bought the distressed National Finance loan book for $7.7 million in 2006, and the Western Bay Finance book in 2008 for $1.5 million. The shares were unchanged at 4.8 cents today.
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