The Commerce Commission is advising local government organisations to be aware of inadvertently breaching the Credit Contracts and Consumer Finance Act 2003 when asking ratepayers to pay for infrastructure improvements.
The Commission recently warned the Southland District Council about payment options the council offered to ratepayers. The payments were for an extension to the sewerage disposal scheme at Oban on Stewart Island.
Various payment options were offered, with two set up as loans paid off by instalments. The Commission found that the two payment options were consumer credit contracts and as such the Council was required to provide initial disclosure under the Act.
The Act requires that certain information must be provided to consumers taking out a loan. This includes advising consumers of the initial unpaid balance under the loan, the total of all advances to be made, the annual interest rate, the method of charging interest and the payments required.
Although the Council had provided information to ratepayers on the scheme extension, it had not been aware that its payment arrangements fell under the Act and hence had not disclosed the information required by the Act.
While the Commission considered that two of the payment options were covered by the Credit Contracts and Consumer Finance Act, it found that another option, though described to ratepayers as a 'Loan Option', was in fact a 'targeted rate' in terms of the Local Government (Rating) Act 2002 and was not covered by the Act.
