A person has been given credit if they have been given the right to:

  • put off paying an existing debt
  • incur a debt and put off paying it
  • purchase goods or services and put off paying for them – this is typically known as a credit sale as the borrower usually gets the goods or services before paying for them in full and pays them off over time.

By law any borrower who is given credit has entered into a credit contract and has specific rights and obligations.

What is a consumer credit contract?

A consumer credit contract is a type of credit contract where the borrower:

  • is a private individual (in other words, they are not a company or incorporated society)
  • is entering the contract primarily for personal, domestic or household purposes (as opposed to primarily for business or investment purposes)
  • may have to pay interest or a credit fee, or provide a security interest.

In addition, the lender must either:

  • be in the business of providing credit (such as a finance company or bank) – although lending does not have to be their only business or main business
  • be in the practice of providing credit as part of their business (such as a car dealer)
  • make a practice of entering into credit contracts on behalf of someone else, or
  • have been introduced to the borrower through a paid advisor or broker.

Read more about when you have entered a consumer credit contract.

Exclusions

Some credit contracts aren’t consumer credit contracts, even if these conditions are met. A contract is not a consumer credit contract where:

  • it is a credit sale and the borrower has to pay in full for the goods or services within 2 months
  • someone has overdrawn their bank account without having an agreed overdraft facility on the account
  • the borrower is acting as trustee for a family trust.

However, these transactions are still credit contracts and they can still be re-opened by the courts if they are oppressive.

Read more in managing debt and collectors