by Susan Edmunds
It decides on an appropriate interest rate based on borrowers’ credit risk. Rates range from 9.99% for the best-rated borrowers, through to 39.99% for those deemed the highest risk.
But now it has tweaked a number of the rates it charges borrowers ranked in grades from C down.
C1 borrowers will now pay 18.52%, up from 17.15%. D1 borrowers will pay 24.41%, up from 20.59%, E1 will pay 31.81% up from 24.66% and F1 31.88%. The lowest, riskiest grade, F5, remains 39.99%.
Harmoney passes the interest rate on to investors, minus a 1.25% service fee on principal and interest repayments.
Harmoney says it has $633,225 in arrears in A-grade loans, almost $2 million in D-grade loans and just over half a million in the F grade. More than $300,000 in loans in the C, D and E categories have been “charged off” the Harmoney books.
Harmoney recently changed its platform fee for borrowers to a flat fee of $375. It had previously been calculated as 2% to 6% of the loan amount depending on the borrower risk grade, with a minimum of $300.
The Commerce Commission had been investigating whether that was a breach of the Credit Contracts and Consumer Finance Act, which requires administration fees to be linked to the work involved in administering a loan. It has not yet reached a conclusion.
In a recent update to Investors, Harmoney said it lent $3.4 million a week in the 2015 financial year, $489,000 a day and $5.67 a second. In a bit over a year, it lent more than $170 million.
About 20% of loans are now rewrites, where the borrower repays their loan and takes out a bigger one. Investors have complained Harmoney is “double-dipping” on fees in this process because it is counted as completely repaid to the investor and the 1.25% cut is taken on the entire amount. Then when the larger loan is written, the investor pays 1.25% on those repayments too.
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