On 16 August 2021 the Commerce Commission (Commission) published new guidance for lenders on their disclosure obligations under the CCCFA, titled ‘Disclosure for Lenders Guidelines’ (guidance).
What does the guidance cover?
The guidance covers the following types of disclosure under the CCCFA:
- Initial disclosure – before the loan is entered into. This is covered in Part B of the guidance.
- Continuing disclosure – at intervals during the term of the loan. This is covered in Part C of the guidance.
- Request disclosure – when the borrower asks for it. This is covered in Part D of the guidance.
- Variation disclosure – when the loan is changed, either unilaterally or when agreed between the borrower and lender. This is covered in Part E of the guidance.
- Transfer of loan disclosure – when the lender transfers the loan to a new lender. This is covered in Part F of the guidance.
- Guarantee disclosure – when the lender takes a guarantee to ensure performance of a loan. This is covered in Part G of the guidance.
- Dispute resolution scheme and financial mentoring services disclosure – when the borrower misses a payment or makes a complaint. This is covered in Part H of the guidance.
For each kind of disclosure, the guidance sets out when (timing and/or circumstances under which) disclosure must be provided, what information must be provided, any particular rules about how disclosure must be provided (over and above meeting the disclosure standards set out in section 32 of the CCCFA) and any exceptions where disclosure is not required.
The guidance also covers lender responsibility principles relevant to disclosure, and penalties and consequences for breach of lender responsibility principles and disclosure provisions.
Our view
While the guidance from the Commission is welcome, we think the timing of release of the guidance is disappointing as lenders are likely to be well advanced in implementing changes to ensure compliance with the CCCFA amendments coming into force on 1 October 2021. Some of the guidance may necessitate system changes with the attendant IT build requirements.
The guidance does not align with what we and many in the industry expected lenders’ disclosure obligations to be under the CCCFA. In particular, the Commission’s expectations regarding disclosure of agreed variations go beyond our expectations.
We are still considering what this new guidance will mean for lenders and compliance with their disclosure obligations. However, we expect it to put considerable pressure on lenders currently working to implement changes to ensure compliance when the CCCFA amendments come into force on 1 October 2021. It also serves as a reminder to all consumer lenders of the need to review policies and procedures in advance of 1 October.
