Debts: Changes to Consumer Credit Legislation
About the Author:
Scott Whitaker
Partner at Duncan Cotterill
Based in Christchurch, Scott is a member of Duncan Cotterill's corporate and commercial team. He focuses on commercial and agribusiness issues and acts for banks, insolvency practitioners, land owners and tenants.
The Credit Contracts Legislation Amendment Act 2019 (Act) became law on 19 December 2019. The Act amends the Credit Contracts and Consumer Finance Act 2003 (CCCFA) and introduces some significant changes which will affect all lenders providing consumer credit in New Zealand.
The key changes introduced are:
The existing lender responsibility provisions in the CCCFA have been extended and strengthened. All lenders will be required to comply with certain minimum requirements set by regulation in carrying out an assessment as to a loan’s affordability and suitability.
Lenders will also be required to keep records that substantiate that loans are affordable and suitable and that fees are not unreasonable.
A requirement for all advertising to comply with new advertising standards, which will be set by regulation.
A fit and proper person test for directors and senior managers of creditors and mobile traders.
The introduction of new personal duties on directors and senior managers and tougher penalties for breaches of the CCCFA.
Disclosure obligations at the commencement of debt collection.
The introduction of an “annual return” regime requiring lenders to give statistical information about their business (including their loan book) to the Commerce Commission.
“Mobile traders” are brought within the scope of the CCCFA.
New rules to govern “high cost” loans. Generally speaking, these are contracts which provide for an annual interest rate (or weighted average annual interest rate on any day during the term) of 50% or more. The new rules, which will take effect from 1 June 2020, include:
❱ A cap on the rate of interest and fees for high-cost loans of 0.8% per day, and a cap on total interest and fees to 100% of the first amount borrowed.
❱ Maximum limits on default fees.
❱ Restrictions on refinancing high cost loans.
❱ A prohibition on charging compound interest and entering into any scheme designed to avoid the high-cost lending restrictions.
Partner
Duncan Cotterill
03 372 6510
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