Disclosure obligations

What is disclosure?

Disclosure is the key information about a loan that you must give to borrowers. It helps borrowers understand what the loan will cost them and what their and your obligations are under the loan.

The disclosure rules ensure the borrower gets the details of their loan, and a written record of the key terms of their contract, before they enter into it. The rules also help borrowers keep track of their debt throughout the terms of the loan.

Disclosure rules also apply when you take guarantees of loans, and enter into buy-back transactions and consumer leases. Read more about consumer leases or buy-back transactions.

Your obligations

When providing disclosure, you must ensure you comply with the lender responsibility principles. You must exercise the care, diligence and skill of a responsible lender throughout all stages of the loan.

You also must assist borrowers to be reasonably aware of the full implications of entering into their loans and to reach informed decisions when they enter into their loans. For example, you must ensure that you draw borrowers’ attention to the key characteristics of the loan, such as the fact that the interest rate is variable or that you have the right to unilaterally vary it.

Read more about the lender responsibility principles.

What are the different kinds of disclosure?

Standard form contract terms and costs of borrowing

Your obligations begin before you have a discussion with a borrower. You must publish your standard form contract terms and costs of borrowing for loans you offer. You can do this in three ways:

• If you have a website, you must display your standard form contract terms and costs of borrowing prominently and clearly on the site.
• If you operate from a premises that is accessible to the public, you must display prominently and clearly a notice that a copy of your standard form contract terms and costs of borrowing are available on request.
• If anyone makes a request, you must immediately supply a copy of your standard form contract terms and/or costs of borrowing, free of charge. This applies even if you have already publicly displayed the information on your website or at your premises.

Read more about publication of standard form contract terms and cost of borrowing.

How must disclosure be made?

Disclosure must:

• be in writing in what is referred to as a disclosure statement, and it must contain the required information
• express the information clearly and concisely and in a way that is likely to bring the information to the attention of a reasonable person
• not be likely to mislead or deceive a reasonable person in relation to any material information
• be in the form prescribed by regulation, if any regulations apply.

These are called the disclosure standards.

Disclosure may be given to the borrower or guarantor by either:

• giving a written disclosure statement to the borrower or guarantor in person containing the required information
• posting a disclosure statement to the borrower’s or guarantor’s last known place of residence or to an address specified by the borrower or guarantor for this purpose
• using electronic communications, providing the borrower or guarantor has agreed to this and the information remains readily and reasonably accessible, stored in a permanent and legible form so that it can be referred to again throughout the life of the contract, eg:
  • emailing or texting the borrower or guarantor a link to your website
  • emailing a disclosure statement to the borrower or guarantor
  • any other electronic means of communications that may be agreed between the borrower or guarantor and the lender that notifies the borrower or guarantor how to access the disclosure statement.

For most purposes, whether disclosure is made by post or electronic means, disclosure is treated as having been made on the day on which the statement is posted or sent.

Model forms

There are no specific forms or formats you must use to provide disclosure in order to comply with the disclosure requirements. What is key is that whatever form you use, you comply with the disclosure standards.

Some forms have been made available for your use. There are two model forms you can use:

• Initial disclosure form for consumer credit contracts (other than revolving credit contracts)
• Initial disclosure form for revolving consumer credit contracts.

More forms may be made available under Regulations. If you use the forms in the Regulations and fill in the details correctly, you will have complied with the disclosure standards.

Initial disclosure

Initial disclosure is the key information about you as the lender and the terms of the loan that you must disclose to the borrower before the loan is entered into. This information includes all fees and interest payable, information about how to make payments, any security interest taken, hardship and cancellation rights, your FSPR number, your dispute resolution provider, and a range of other information.

When must I provide initial disclosure?

You must provide initial disclosure before the borrower enters into a loan. Having this information before they enter into the loan helps the borrower to make an informed choice as they will be able to fully consider the loan beforehand.

What information must be disclosed?

Before a loan contract is entered into, you must:

• disclose to the borrower as much of the key information as applies to the loan
• give or send to the borrower a copy of all the terms of the contract that have not already been disclosed as ‘key information’ above.

See the key information required on page 8 of the Disclosure Guidelines.

Continuing disclosure

You must regularly give the borrower key information about their account during the lifetime of the loan, except where some limited exceptions apply. This is known as continuing disclosure. This could be in the form of a monthly bank statement or credit card statement for example.

When must I provide continuing disclosure?

Continuing disclosure must be made at least:

• every 6 months for most loans
• every 45 working days for a revolving consumer credit contract.

A revolving consumer credit contract is a credit contract that:

• anticipates multiple loan advances, to be made when requested by the borrower under the contract
• does not limit the total amount to be advanced to the borrower under the contract.

An arranged overdraft on a cheque account and a credit card are examples of revolving consumer credit contracts.

What information must be disclosed?

You must include the following information in each continuing disclosure statement:

• the opening and closing dates of the period covered by the statement
• the opening and closing unpaid balances
• the date, amount and description of each advance during the statement period
• the date and amount of each interest charge, and each fee or other charge debited during the statement period
• the date and amount of each payment made by the borrower during the statement period
• the amount and timing of the next payment that must be made
• the annual interest rate or rates applying during the statement period (expressed as a percentage)
• in the case of a credit card contract, a prescribed minimum repayment warning must be included.

Exemptions to continuing disclosure

There are some situations where you will not have to provide continuing disclosure. Read more on page 13 of the Disclosure Guidelines.

Request disclosure

Whenever the borrower makes a request in writing to ask for specific information about their loan, you must provide disclosure – this is known as request disclosure.

When must I provide request disclosure?

Request disclosure must be provided free of charge, unless you have the right under the contract to charge a fee for it.

If you receive a request for disclosure you should tell the borrower if any fee is payable for providing that disclosure. Any fee charged for providing request disclosure must be reasonable.

You must ensure that borrowers receive the request disclosure within 15 working days of receiving the request, or if a fee is payable under the contract for providing request disclosure within 15 days of receiving payment of that fee.

What information must be disclosed?

If requested by the borrower, you must disclose:

• a copy of the contract
• any disclosure statement that has already been provided, or should have been provided, before the request was made
• a copy of any continuing disclosure statement (a loan statement) for any reasonable statement period specified by the borrower
• the effect if the borrower repays some of their debt early
• the amount required for full-prepayment at a specified date and how that amount was calculated
• the amount of any fee payable on full or partial prepayment and how this is calculated
• full details of any changes to the loan since it was made
• the unpaid balance, including any outstanding interest charge (calculated at the date the disclosure statement is prepared)
• what payments the borrower must make (and/or how those payments were calculated)
• how often the borrower must make payments
• the number of payments the borrower must make
• the total amount of payments the borrower must make under the contract (for contracts due to be paid within 7 years).

Exceptions to request disclosure

There are some situations where you will not have to provide request disclosure.

Read more on page 15 of the Disclosure Guidelines.

Variation disclosure

Variation disclosure is when the loan is changed, either unilaterally by you or when agreed between you and the borrower.

Agreed changes

Where you agree with the borrower to change the contract, generally you must disclose details of the change before it takes effect. This includes where agreed changes are made to a contract because of a hardship application.

In some limited circumstances, you can choose to disclose the change to the borrower when providing the next continuing disclosure statement, or within 5 working days of the date that the change takes effect. These circumstances (which do not apply to high-cost consumer credit contracts) are when the change:

• reduces the borrower’s obligations (for example by reducing an administration fee)
• gives the borrower more time to make a payment
• releases some or all of a security
• increases or decreases the borrower’s credit limit.

You must provide full details of the change, which in the Commission’s view means that you must provide borrowers with full particulars of any agreed change that would alter the information required in initial disclosure.

You must also comply with the disclosure standards.

From 1 December 2021 you will specifically need to disclose the following information if it is affected by the change:

• credit limit
• annual interest rate
• total interest charges
• credit fees and charges
• payments required.

For further information about the information that needs to be disclosed where you agree to a change and an example of disclosure see page 17 of the Disclosure Guidelines.

Unilateral changes

Some contracts specifically give you the power to make a unilateral change to terms of a contract without having to agree the change with the borrower. For example, a contract might expressly state that you can change the amount of a particular fee, or you may have a floating or variable interest rate that you can change at any time.

You must disclose the required information within 5 working days of the date the change takes effect if the change is to:

• the interest rate or the way interest is calculated or charged
• the amount, frequency, timing or method of calculating fees or charges or any payment
• the amount of a credit limit under the contract.

Where the change reduces the borrower’s obligations, or gives them more time to pay, you may (unless the contract is a high cost credit contract) choose to provide disclosure either:

• within 5 working days of the date that the change takes effect
• with the next continuing disclosure statement due.

You are not required to disclose the changes to a particular borrower if you cannot reasonably locate the borrower.

You must provide full details of the change, which in the Commission’s view means that you must provide borrowers with full particulars of any agreed change that would alter the information required in initial disclosure.

Where you are unilaterally changing the interest rate, fees or charges payable under a contract, you must meet the disclosure standards. However, where you are making unilateral changes to the contract, you can (unless the contract is a high-cost credit contract) also choose to meet these obligations by general publication of the changes, by:

• displaying information about the changes prominently at your place of business
• advertising the changes at least once in the daily newspapers published in all the following areas in which you do business: Whangarei, Auckland, Hamilton, Rotorua, Hawkes Bay, New Plymouth, Palmerston North, Wellington, Nelson, Christchurch, Dunedin and Invercargill
• posting information about the changes on your website (if you have one).

For more information about what and how information must be disclosed where you make a unilateral change see page 18 of the Disclosure Guidelines.

Transfer of loan disclosure

If you transfer a loan to a new lender, there is certain key information that you must provide to the borrower.

When must I provide transfer disclosure?

You must disclose information relating to the transfer within 10 working days of the date on which the transfer takes effect.

What information must be disclosed?

If you transfer your rights to another party (the new lender), you have an obligation to disclose to every borrower (and guarantor):

• the name, address and contact details of the new lender
• the new lender’s registration number under the register of financial service providers and the name under which the lender is registered
• the name and contact details of the new lender’s dispute resolution scheme
• the date that the loan was or is intended to be transferred
• the impact (if any) of the transfer on the borrower
• that the transfer does not otherwise affect the terms of the loan that the borrower entered into.

Transfer disclosure is not required if:

• the transfer is for securitisation or covered bond arrangements, or similar arrangements
• a particular borrower or guarantor cannot be reasonably located.

Guarantee disclosure

If you take a guarantee to ensure performance of a loan you must provide guarantee disclosure to every guarantor.

When must I provide guarantee disclosure?

There are five situations where you have specific disclosure obligations to a guarantor:

• when you take the guarantee at the start of the loan (initial disclosure)
• if you enter into any subsequent loan with the borrower to which the guarantee applies
• if you make a change to the loan (variation disclosure)
• if a guarantor requests information about the loan (request disclosure)
• if you transfer the loan (transfer disclosure).

Read more about what information you must disclose to a guarantor on page 21 of the Disclosure Guidelines.

Dispute resolution scheme and financial mentoring service disclosure

From 1 December 2021 you must provide information about your dispute resolution scheme and financial mentoring services in certain situations.

When must I provide dispute resolution scheme disclosure?

You must disclose information about your dispute resolution scheme:

• in every notice acknowledging receipt of a hardship application
• in response to any written complaint received from a borrower in relation to any enforcement action in connection with the repossession of consumer goods
• in response to any other type of complaint described in the regulations that you receive from the borrower.

(The above obligations to provide information are in addition to the requirement that lenders disclose the name and contact details of their dispute resolution scheme as part of the key information required to be provided to borrowers at initial disclosure).

When must I provide dispute financial mentoring services disclosure?

You must disclose information about financial mentoring services:

• if a borrower has defaulted on a payment, or has caused their credit limit under the contract to be exceeded
• in every notice acknowledging receipt of a hardship application
• if and when you decline an application for a high-cost consumer credit contract.

How must information be disclosed

The regular disclosure process does not apply to dispute resolution scheme and financial mentoring services disclosure.

Read more about how information must be disclosed at page 24 of the Disclosure Guidelines.

Disclosure before debt collection

From 1 December 2021, you must disclose information to borrowers before you start collecting debts owing under some types of credit contracts. The disclosure requirements apply whether the credit contract was entered into before or after 1 December 2021.

For more information about what a debt collector must disclose to a borrower and how that information must be provided see our Guidance on the disclosure requirements when engaging in debt collection.