Auckland company fined $400,000 for deceiving ‘highly vulnerable’ people in false home savings scheme

An Auckland company has been fined $400,000 for a “carefully crafted scheme” that targeted “vulnerable” low-income home buyers.

Home Funding Group Limited (HFG), which is currently in liquidation, was convicted on two charges under the Fair Trading Act 1986 in the Auckland District Court in January.

HFG offered services to prospective home buyers who found it difficult to save for a deposit or qualify for bank finance.

It claimed to operate a savings scheme which could assist customers to purchase a home with a deposit as low as 5 per cent.

However, customers’ payments were not paid into or treated as being in any form of savings scheme.

The contracts that customers entered into were for a brokerage and financial coaching service.

Between February 2015 and April 2017 HFG received $316,361 from 149 customers. They typically paid HFG $50-$100 per week.

In sentencing remarks Judge Josephine Bouchier said it was a “carefully crafted scheme” and the conduct involved “serious offending against vulnerable people”.

She said affidavits from four victims were “extremely sad” and “heart-rending” and that all four complainants were still unable to purchase houses of their own.

In presentations to prospective customers HFG said at the end of the contract term customers would get back the money they paid to HFG; money paid to HFG could be used for a house deposit; and HFG had a special relationships with various banks.

Bouchier directed full refunds be paid to eight complainants named in the commission’s case and voided their contracts.

Since the company is now in liquidation, the question of whether refunds will be paid is in the hands of the liquidator.

The Commerce Commission charged HFC in April 2019.

“The claims made by HFG induced consumers to make regular payments to HFG in the belief they were putting money towards a house deposit,” chairwoman Anna Rawlings said.

“They were not. In fact they were paying for financial services and HFG’s contract allowed HFG to limit or avoid providing those services.

“HFG did not have special relationships with any bank.

“The money paid could not be used for a deposit, and the commission is not aware of a single customer who completed the HFG contract and successfully purchased a home.”

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