The Commerce Commission has filed legal action against payday lender Moola, saying it has not been a responsible lender.
It said Moola did not take enough care to see if borrowers could repay without hardship, didn't treat borrowers ethically, and didn't ensure rates charged were not oppressive.
Moola offers short-term loans up to $5000 via the Moola and Need Cash Today websites.
The alleged breaches occurred between June 2015 and November 2017, when it was charging between 182 and close to 550 percent a year.
In a statement NZ Fintech defended its interest rates.
"As the loan is unsecured with little to no recourse available to the lender, we have a strong interest in ensuring that the on-boarding process of new customers identifies and mitigates the risk of hardship."
Its chief executive, Guy Randall said he was confident the company was a socially responsible lender.
"Moola loans are for short-term cash flow needs and are not suitable for every situation, we make this very clear.
"Moola has a strong focus on compliance and strives to be industry leading in this area, we don't always get it 100 percent right, [but] when we do make a mistake, we fix it."
Mr Randall said Moola cooperated with the investigation and worked closely with the Commerce Commission to understand its concerns during its investigation in 2017.
"It is unfortunate the Commerce Commission has decided to seek guidance from the court, however we will defend the claim and welcome any clarity about responsible lending practices that can ultimately be provided," he said.
The Commission was seeking refunds for 50 people, a ruling the company has breached consumer credit laws, and a ban on Moola making new loans until it meets legal obligations.
The Commission's investigation was initiated following a referral from Christchurch budget advisory service, Fincap.
Fincap chief executive Tim Barnett said he was delighted to see the Commerce Commission had filed legal proceedings.
"We hear daily evidence of misbehaviour by companies in the short-term high cost loan end of the market and we're really pleased that finally one is going to face the music in court."
While it's not illegal to make a high-interest loan, Mr Barnett said lenders need to make sure the person taking the loan has the ability to pay it back.
"Without pointing a finger at Moola, it's pretty clear there are companies in that end of the market that are not conducting what we would regard as adequate affordability tests."
Mr Barnett said that around 50 percent of people who use short-term lenders end up getting a second loan to pay off the interest on the first one. A further half of them end up being chased by debt collectors.