From 6 June 2015 all lenders (including banks and third tier lenders) now have increased responsibilities when lending money for consumer purposes and repossessing goods over which they have security.
The changes apply whether you are obtaining a loan to buy a car or other consumer goods or a short term loan to last you until pay day. All lenders will be required to comply with a number of responsible lending principles. The principles require lenders to act with the care, diligence and skill of a responsible lender in all dealings with borrowers – this includes while advertising and before the contract is entered into and extends throughout the full term of the loan.
A new Responsible Lending Code (“the Code”) has been drafted. It is not binding but compliance with the Code will be treated as evidence of compliance with the responsible lending principles.
There are now serious penalties if a lender commits an offence under the CCCFA –$200,000 for an individual and $600,000 for a company. The Commerce Commission can enforce these laws and also has the power to issue infringement notices. The maximum a borrower can claim in statutory damages from a lender is increasing to $6,000.
Other changes include:
- Lenders will be prohibited from taking security over “essential” goods, such as bedding, medical equipment and cooking equipment, unless you have taken a loan to purchase such goods.
- Lenders must now give you details of key information about the terms of the credit agreement prior to entering into the contract rather than within five working days of entry as currently allowed under the CCCFA.
- You will be able to request the lender’s standard terms, fees, interest rates and other costs to borrow money, at any time, free of charge. These should be publicly available and displayed at the lender’s premises.
- You now have a five day cooling off period during which you can cancel your loan agreement (the old timeframe was three days).
- In limited situations an unforeseen hardship application will be able to be made after a default on the loan repayments has occurred. Previously a borrower could not make an application after defaulting. An unforeseen hardship application can be made if you are unable to meet your obligations due to an unforeseen hardship (such as an illness, injury or loss of employment).
- Lenders are required to take into consideration the lender responsibility principles when considering applications and must respond in writing with reasons as to why an unforeseen hardship application is unsuccessful. No repossession action can take place until the application has been resolved.
- The Credit (Repossession) Act 1997 will be repealed and the amended CCCFA will now deal with repossession. There are a number of changes to the repossession process including:
- Goods to be repossessed must be specifically identified in the loan agreement at the outset – it is insufficient to describe the goods by kind. General security interests over all of your assets are no longer allowed.
- Repossession agents who will be repossessing goods under loan agreements entered into after 6 June 2015 will be required to be licensed or hold a certificate of approval issued under the Private Security Personnel and Private Investigators Act 2010.
- Repossession can not be enforced if there is an unresolved unforeseen hardship application made to the lender as noted above.
- There are also changes to the timeframes for the service of notices and selling of repossessed goods.
Please contact us if you require further information about the changes to the CCCFA.
by Daniel Maguire (Daniel@turnerhopkins.co.nz ) and Lizandra Bailey (Lizandra@turnerhopkins.co.nz).
“John is very easy to talk to, he never makes you feel dumb, and never makes you feel like you are wasting his time for asking questions. He explains everything very clearly, every time. John's support staff are also very efficient and so easy to deal with. No detail is missed when dealing with them. My husband and I are fans of them all :)”
“I can't speak highly enough of Jenny. She got everything done in a timely manner and when my ex-husband threw a spanner in the works at the eleventh hour she got the required documentation to his lawyers and settlement back on track.”
“To Michael Robinson – I wanted to thank you and your colleagues for many years of excellent service to the Bank. You have an outstanding business that has proved to be one of the most reliable and ethical businesses that Collections have dealt with in the almost 9 years I was with the Bank.”
“I have struggled with different legal firms over the years, but over the past few years I have engaged with Turner Hopkins with various requirements from personal relating to wills, family trust, property settlements and contracts through to commercial engagements including employment advice, commercial lease agreements and general legal advice. I have engaged with a number of the people in the firm and always found them professional, punctual in their responses and very sound in the advice provided.”
“Joy, we cannot thank you enough for your help with our purchase! You have been wonderful to deal with and so proactive (and patient with my numerous emails). We will be visiting NZ in April so will make sure we drop in to thank you in person.”