Additional Changes To Consumer Credit Laws Come Into Effect Today

A further suite of changes to consumer credit laws become effective today. These changes are significant and build on the existing responsible lending requirements. They include greater detail about the types of information lenders need to collect from borrowers before lending them money or providing further credit under an existing loan.

For borrowers, this change means more information will be gathered by lenders about the reasons why they need the loan, their income, and expenses. This information will enable lenders to properly assess whether the loan will meet the borrower’s needs and that the borrower can afford the repayments without getting into financial difficulty.

Commission Chair Anna Rawlings says the changes to consumer credit laws are intended to better protect borrowers from taking on unaffordable debt and provide greater clarity for lenders when assessing loan applications.

“Lenders are obliged to help their customers to make informed choices when they are taking out loans. These changes to responsible lending requirements should help to deliver greater consistency in the provision of suitable and affordable loans to borrowers throughout the sector,“ said Ms Rawlings.

A range of other changes also come into force today. Directors and senior managers are required to exercise due diligence to ensure lenders comply with their consumer lending obligations. There is greater clarity about advertising standards for consumer loans and three new types of disclosure requirements have been introduced. Lenders must also keep records demonstrating that their fees are reasonable and regularly review their fees. Lenders may face financial penalties if they do not comply with their consumer lending obligations.

Most of the changes to the Credit Contracts and Consumer Finance Act (CCCF Act), and the associated regulations, apply to lenders that provide consumer credit and mobile traders who sell goods on credit.

“The Commission’s priority in recent months has been to educate lenders about recent changes to consumer credit laws and the changes coming into force today so they understand what is required of them and take steps to comply with their additional obligations,” said Ms Rawlings.

You can find more information about the changes to the credit laws and guidance resources on the Commission’s website here.

Background

1 December changes

From 1 December 2021, lenders providing consumer credit and mobile traders selling on credit will need to comply with the changes to the CCCF Act and associated regulations.

More Information about lender responsibility, due diligence, disclosure, and advertising and fees can be found on the Commission's website.

Changes to credit laws

The Government has introduced a range of changes to the CCCF Act and CCCF Regulations which came into effect in stages between December 2019 and December 2021. For more information about all of the changes and the timeline, see the Ministry of Business, Innovation and Employment’s website and the Commission’s website.

In addition to the 1 December 2021 changes, other recent changes are:

• 1 October 2021 - Certification is now mandatory for lenders and mobile traders
• 1 June 2020 – Contracts entered into by mobile traders that sell on credit are treated as consumer credit contracts, whether or not they charge interest or fees.
• 1 May 2020 – Introduced a range of changes in relation to high cost loans.

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