Government announce a cap on interest (and other CCCFA changes)
The Government has today announced a number of significant changes to the Credit Contracts and Consumer Finance Act 2003 (CCCFA). This follows a review by the Ministry of Business, Innovation and Employment (MBIE) into consumer credit laws, after MBIE's earlier discussion paper released in June.
The changes include:
- introducing a cap on the interest and fees payable on high-cost loans (of an amount equal to the amount borrowed). Currently the Responsible Lending Code defines “high-cost” as where the annual interest rate is 50% or greater;
- increasing the financial penalties, statutory damages, and banning order powers for irresponsible lending;
- introducing a “fit and proper person” test for directors and executives of consumer lenders, as well as duties on directors and executives to comply with their obligations;
- updating the responsible lending obligations and the Responsible Lending Code and with the aim of making requirements more clear (including introducing prescriptive requirements for lenders’ inquiries into borrowers);
- making certain advertising guidance in the Responsible Lending Code binding;
- making lenders responsible to prove their fees are reasonable (at the Commerce Commission’s request); and
- targeted rules for mobile lenders.
For more details, read the MBIE summary of the planned changes here.
The devil will obviously be in the detail for some of these changes. It is also not clear if these are the only consequences of the recent CCCFA review, so attention to the space remains important. If you have any questions in relation to the CCCFA, or any of the above, please get in contact with a member of our team.
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