The commission says that under law an outstanding debt becomes 'crystallised' once a repossessed security item is sold and the sales proceeds are credited to the loan. The creditor cannot recover interest and credit fees on the remaining outstanding debt.

Geneva Finance misrepresented that the additional interest and fees were due when it sent statements and or reminder letters to those customers affected by the breach.

"Once the commission began investigating this issue, Geneva Finance moved quickly to review all relevant accounts and took immediate action to refund these charges and put in place measures to prevent the same breaches from happening again," Commerce Commission chairman Paula Rebstock said.

"It is not acceptable for finance companies to make these kinds of mistakes. They are in a position of trust and must ensure their systems comply with the law."

Geneva chief executive Shaun Riley says the company cooperated fully with the commission and there is little impact on the business.

"There is no ongoing effect on the company's liquidity or overall operations and this has been fully provided for in its financial statements and forecasts."

He notes the the settlement relates to transactions which happened four months ago and the amount directly refunded to clients was $40,000, with the remainder consisting of internal charges reversed into customers' accounts.

"There has been no impact on Geneva's liquidity as a result of this settlement."