Loan scheme paused after $10m payout to Aucklanders

Canterbury Regional Council has quietly paused a loan scheme after a similar Auckland one resulted in a $10 million payout to ratepayers.

Up until late 2021, Environment Canterbury, or ECan, was offering ratepayers a loan of up to $6000 for healthy homes improvements, such as installing insulation and heating, but aspects of the loan may be in breach of the law.

Around $4m had been distributed between 1400 property owners in Canterbury since the scheme launched in 2018, according to ECan director of strategy and planning Katherine Trought.

The scheme had an interest rate of 5.9%, to be paid over nine years. All repayments were made through residents’ rate bills.

Auckland Council was warned in February last year that its scheme potentially broke the Credit Contracts and Consumer Finance Act. ECan paused its scheme in December to make sure it wouldn’t be breaking the same rules.

Trought said the act was a complex piece of legislation, ‘‘especially here where it is also tied into our powers to levy rates’’.

An update to ECan’s website on December 14 said the council’s review of the scheme was ‘‘well under way, with much of the initial work done’’, but it was still in progress yesterday.

Part of the act Auckland was potentially in breach of was regarding credit checks and other obligations. The onus was on lenders to ensure that people who took on debt were in a financially secure enough position to meet the repayments.

Ecan tested applicants’ repayment ability based on their history of rates payments, but Trought said there were other tests.

‘‘The scheme was also geared to keep repayments low,’’ she said.

The Commerce Commission can only issue warnings – penalties are issued by the courts. Regardless, after being warned, Auckland paid $10m to ratepayers who had paid interest or incurred penalties over missed payments.

Trought said that in Canterbury, ‘‘very few’’ people did not meet their repayments.

She did not give an exact number, but said it was a ‘‘fraction of a percentage’’ of the approximately 1400 people who borrowed money.