Government signals further tightening of consumer credit laws

The Government has recently signalled further tightening of our consumer credit laws and is currently seeking public feedback on the adequacy of the protections afforded to consumers of credit in New Zealand. The purpose of the review is to assess whether borrowers are better informed, whether predatory and irresponsible lending has reduced, and whether further steps are required to ensure responsible lending, particularly for vulnerable consumers since the 2015 reforms of the Credit Contracts and Consumer Finance Act 2003 (commonly referred to as the CCCFA).

MBIE’s discussion paper on the review of the CCCFA

The Ministry of Business, Innovation and Employment (MBIE) released a discussion paper last month, which found that although the CCCFA changes implemented in 2015 improved consumer protection, there are still some areas that need more work. The discussion paper found that there was increased awareness amongst lenders of responsible lending requirements and an improvement in disclosure and advertising by lenders. However, MBIE also identified continuing problem areas such as high-cost credit, irresponsible lending, unreasonable fees, unaffordable debt and predatory behaviour by mobile traders.

The discussion paper invites submissions on a number of proposals to address these issues, including:

  • Capping of interest rates and accumulation of interest and fees for high-cost lenders (concept to be defined, but the paper identifies payday lenders and other commercial short-term lenders as targets)
  • Empowering the Commerce Commission to deregister lenders and ban directors who are not complying with their responsible lending obligations and disclosure requirements
  • Increasing industry levy on creditors to help fund the Commerce Commission’s regulatory activities
  • Expanding penalties for breaches of lenders’ responsibilities, including penalties for directors personally
  • Introducing more prescriptive requirements for affordability assessments and advertising
  • Requiring lenders to substantiate the reasonableness of their fees or imposing specific caps on fees
  • Tightening regulation of un-related third-party fees (for example, finance broker fees)
  • Bringing mobile traders and certain credit-based businesses that allow goods to be received upfront and paid in instalments within the ambit of the CCCFA
  • Providing greater consumer protections at the debt collection phase (including potentially making third-party debt collection agencies directly subject to the CCCFA, making external debt collection fees cost-based and requiring key loan information to be provided to a borrower at the commencement of debt collection)

MBIE are also interested to hear from people on whether small business loans, investment loans for retail investors and family trusts should also be included in the protections of the CCCFA.

If implemented, some of the proposals could result in significant compliance costs for those affected. Please contact us if you like our assistance with your submission to MBIE. Submission on the discussion paper closes at 5pm on Wednesday, 1 August 2018.

Business Law team

If you need any assistance with the sale or purchase of your business, do not hesitate to get in touch with the Business Law team at Lane Neave.

Gerard DaleClaire EvansGraeme CrombieEvelyn JonesAnna RyanJoelle Grace,  Peter OrpinEllen SewellMatt TolanCarlo WanKristina SutherlandJacob NuttWhitney MooreAlex StoneBen Cooper, Lisa Catto

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