Credit fee guidelines issued to industry

The Commerce Commission has released its Consumer Credit Fees Guidelines, to provide guidance for lenders in setting credit fees.

The guidelines describe the Commission’s view on how lenders should approach setting their fees in order to comply with the Credit Contracts and Consumer Finance Act 2003 (CCCF Act), which requires credit fees charged by lenders to be reasonable.

The guidelines are not exhaustive, nor are they intended to be legally binding.

“The guidelines set out the general principles that lenders should take into account in setting their fees. They also give guidance on whether or not particular types of costs can be included in fees,” said Antonia Horrocks, the Commission’s General Manager, Competition.

“We know this is can be a complex area, so we have included examples which we think will give clarity for creditors,” said Ms Horrocks. “For example, a lender cannot seek to cover costs of advertising and promotion in a credit fee. That would be unreasonable because these costs do not have a close relationship to a specific loan transaction.”

The guidelines were sent to relevant credit sector organisations including more than 20 groups or individuals who made submissions on the draft guidelines, and to all dispute schemes for distribution to members.

“We recommend creditors read the Guidelines carefully and think about the fees that are being charged and consider whether they are credit fees. If they’re not sure they should consider seeking legal advice,” said Ms Horrocks.

The Commission first issued draft guidelines in 2009 and 2010 but was not able to finalise them until the outcome of the long running Sportzone/MTF case in which the Supreme Court made clear that credit fees should only cover transaction-specific costs.

“Unfortunately the MTF/Sportzone litigation was very protracted, as the case moved through various courts over 7 years. We received the Supreme Court’s decision in 2016 and were glad to see our approach upheld, and we then moved to finalise the guidelines, following consultation,” said Ms Horrocks.