A finance company has been fined for using borrowers' household items - including beds and cooking equipment - as security for their loans.
In the Commerce Commission's first such prosecution, Aotea West Auckland pleaded guilty to five representative charges under the Credit Contracts and Consumer Finance Act 2003.
The Act prohibits lenders from using essential cooking and medical equipment, portable heaters, washing machines, refrigerators, beds and bedding, and critical identity and financial documents as security for loans.
It means lenders cannot repossess the items if the borrower fails to make payments.
The commission said the offending occurred in 2015 and 2016.
Aotea West Auckland took security interests took security interests over items such as beds, cooking equipment, washing machines and refrigerators.
The company was fined $48,750 at the Waitakere District Court on Friday.
It was also ordered to pay damages totalling $4,515.41 to 19 affected borrowers.
The judge, June Jelas, said the legislation was designed to protect the vulnerable, and high standards were required of operators.
"There was no repossession, or risk of repossession, given the lender's policy, but by entering into the contract the borrowers, who were generally vulnerable, believed they were at risk of losing items that were of high value to them."
Judge Jelas said the level of harm and stress that could be caused to borrowers by the offending was difficult to quantify, but that a high level of deterrence should be applied.
The Aotea Finance group of companies comprises five separately registered companies with a single group manager. All charges were against Aotea Finance (West Auckland) Limited only.
The Commission has published information for consumers, including advice about repossession agents trying to take essential household items.
"These goods are protected by law because, generally, they are worth more to borrowers than they are worth as security for loans," said Commissioner Anna Rawlings.
"Lenders may not use the threat of repossession of these goods to encourage borrowers to pay."