The Commerce Commission says Southern Cross Finance has refunded $700,000 to 250 customers, who were overcharged between July 2006 and October 2009.
The commission says Southern Cross had been charging customers a loan establishment fee that was about 1% to 2% of the loan advanced, which was unlikely to reflect the actual cost of setting up the loan.
Southern Cross Finance is contacting customers to arrange refunds.
It now charges a standard establishment fee of $500 on all consumer loans.