Changes to credit laws
Credit laws are changing, it is important that you understand the changes to your obligations.
The commencement of the Credit Contracts Legislation Amendment Act 2019 (CCLAA) has been impacted by COVID-19. At this stage, the Ministry of Business Innovation and Employment has indicated:
- The commencement of new part 5A of the CCLAA relating to fit and proper person certification will be delayed from 1 September 2020 to no earlier than 1 March 2021.
- Commencement of the new regulations and other remaining provisions of the CCLAA will be delayed from 1 April 2021 to no earlier than 1 October 2021 and no later than 1 April 2023.
- These dates will be reviewed every 3 months and any changes will be advised.
- There are two start dates for provisions relating to high-cost loans; some provisions will come into effect on 1 May 2020, the remaining provisions come into force on 1 June 2020.
We will update this page with further information when it becomes available.
The changes are being introduced in stages with the first changes effective from 20 December 2019. Some of the dates that the changes take effect are set but others may be confirmed by the Governor General by way of Order in Council. Some obligations will take effect once Regulations have been passed. As a results some commencement dates are noted as “proposed”. This means that these are the commencement dates that are currently proposed by MBIE but are not yet final. We will provide final commencement dates as soon as we can.
- Introduction of penalties and statutory damages for breaching Lender Responsibility Principles
- Amendments to how disclosure can be provided
- Changes to the ability to take repossession enforcement action where there is a complaint or hardship application
- Expansion of enforcement response options for the Commission to include enforceable undertakings
- Prohibition on the enforcement of guarantees in some situations.
- Changes to the criteria for the application of repossession rules
- Introduction of offences (including infringement offences) for failing to make prescribed information publicly available including online.
1 May 2020
Introduction of the following rules that apply to high-cost consumer credit contracts (HCCC):
- Lenders are required to disclose additional key information
- Total cost cap – fees and interest under a HCCC will be limited to 100% of the first advance
- Lenders cannot charge compound interest
- Default fees exceeding $30 considered unreasonable unless the lender can prove it is reasonable
- Anti-avoidance provision to address anyone trying to circumvent provisions apply to HCCC
- Expansion of remedies for CCCF Act breaches including compliance orders and corrective advertising
- Option of providing certain disclosure within 5 days or next continuing disclosure statement no longer applies for high-cost loans.
1 June 2020
- All mobile trader contracts where goods are not paid for in full at the time of purchase will now be subject to the CCCF Act
- Introduction of rules that only apply to high-cost consumer credit contracts (HCCC):
- Rate cap – maximum daily charge of interest and fees added to a HCCC will not be able to exceed 0.8% of the credit provided per day
- Restrictions on entering into HCCC in certain circumstances when the borrower already has or has had other HCCCs
- Clarification of cancellation rules for goods sold on deferred payment
- Amendment to initial disclosure requirements for credit agreements that are also layby sales.
It is currently proposed that the following changes will come into force not before 1 October 2021:
- Introduction of duties on directors and senior managers to exercise due diligence and penalties for failing to comply
- Lenders will no longer be able to rely solely on the fact that information has been provided by the borrower to show that they have made reasonable inquiries about the affordability and suitability of loans
- Introduction of minimum advertising standards and requirements for affordability and suitability inquiries
- Lenders must keep records demonstrating compliance with their obligation to undertake affordability and suitability inquiries
- Lenders will need to take reasonable steps to provide information about the loan to borrowers in the same language as they advertise in
- Lenders under HCCCs must prominently disclose in print and internet advertising prescribed information about disputes resolution and financial mentoring services
- Advertisements for HCCCs will be required to include a prominent statement that a HCCC should not be used for long-term or regular borrowing, and is only suitable for temporary, short-term cash needs
- Lenders must provide an annual report to the Commission containing specified information
- Lenders must make disclosure to borrowers when they start debt collection
- Lenders must keep records demonstrating that their fees are reasonable and review their fees if there is a material change that is likely to affect the reasonableness of the fee
- New obligation to undertake affordability and suitability inquiries before making “material changes”
- Lenders (except for those exempt) and mobile traders must be certified by the Commission that their directors and senior managers are fit and proper persons to hold their respective positions.