Most Read Contributor in New Zealand, September 2016
Stronger consumer credit protections are proposed in the Credit
Contracts and Financial Services Law Reform Bill (Bill),
which passed its first reading last week and is now with the
Commerce Select Committee.
Submissions are due by 1 November 2013.
Credit providers will be required to exercise the care,
diligence, and skill of a responsible lender in respect of credit
advertising, and before and after providing consumer credit, and to
make reasonable inquiries that the credit will meet the
borrower's needs and will be capable of repayment without
causing substantial hardship.
They will also need to assist the borrower to make an informed
decision about whether to enter the agreement or any variation or
guarantee and to ensure that:
the contract is expressed in a clear, concise and intelligible
the standard terms and costs of borrowing are freely and
publicly available on their Internet sites and at their business
initial disclosure is made before a credit contract or
any credit-related insurance or extended warranty is provided
(rather than within five working days, as is currently the
The principles will be set out in a Responsible Lending Code.
While the Code will not be legally binding, compliance with it will
be taken as evidence that no oppressive conduct has occurred, and
credit providers which breach it more than twice may be banned.
Other consumer protections proposed in the Bill include:
extending to five working days the 'cooling off' period
for consumers to cancel their credit contracts
a new requirement to disclose when a creditor's rights
under a consumer credit contract are transferred to another
releasing borrowers from the obligation to pay interest or fees
if their lender is not a registered financial service provider (see
Brief Counsel on the new requirement for lessors of consumer
goods under financing arrangements to register as financial service
additional criteria to aid a court in deciding whether
oppression has occurred
explicit processes and timeframes for consumers to apply for
relief in situations of unforeseen hardship
preventing goods from being repossessed unless they are
specifically identified in the credit contract and prohibiting
essential household items from being listed as securities
licensing of repossession agents and employees under the
Private Security Personnel and Private Investigators Act 2010,
stronger powers to prevent certain entities or individuals from
becoming registered financial service providers or to revoke their
The Bill amends the Credit Contracts and Consumer Finance Act
2003 and repeals the Credit (Repossession) Act 1997 and
incorporates its provisions within an expanded Credit Contracts and
Consumer Finance Act.
The information in this article is for informative purposes
only and should not be relied on as legal advice. Please contact
Chapman Tripp for advice tailored to your situation.
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