The lawyer for a finance company has told an appeal court the penalty fees charged to borrowers who pay off their loans early are reasonable.
Avanti Finance was cleared by the Auckland District Court last year of 50 charges under the Credit Contracts and Consumer Finance Act relating to the calculation of break fees.
The Commerce Commission is appealing against the ruling, saying Avanti's penalty fees should be designed to protect the consumer, not the lender.
The commission's lawyer Mark Woolford told the High Court in Auckland that the formula Avanti Finance used to calculate early payment fees was artificial.
Mr Woolford said consumers who paid off their loans early were not breaching their contract because they have a statutory right to repay.
The lawyer for Avanti Finance, Julian Miles QC, says in 49 of the 50 cases, charges were less than the cost incurred by Avanti by the loan being paid early.
He says the company did not charge fees it was entitled to.
Avanti Finance is the first company to face such charges, and other finance companies have representatives in the court's public gallery to keep a close watch on the case.
Justice Asher has reserved his decision.