Government proposes further consumer protections in the Credit Contracts Legislation Amendment Bill
In April 2019, the Government introduced its Credit Contracts Legislation Amendment Bill (Bill), responding to issues identified by the Ministry of Business, Innovation and Employment (MBIE), following its review of the consumer credit sector last year. Read our summary of material aspects of the Bill.
On 3 September 2019, Hon Kris Faafoi, Minister of Commerce and Consumer Affairs, announced the Government’s intention to introduce further consumer protections into the Bill.
These protections will include:
An interest rate / fees cap for all lending
- Lenders will not be allowed to charge more than 0.8 per cent interest and fees per day for a loan.
- This is in addition to the proposed cap on the costs of borrowing recoverable for “high-cost consumer credit contracts” under the Bill.
Additional responsible lending laws for mobile traders
- All “mobile traders” will be required to:
– check that credit is affordable and suitable for each customer, before providing anyone with goods that aren’t paid for upfront, and
– provide information to help borrowers make informed decisions about whether to sign up for credit.
- This is in addition to the proposed requirement for all “mobile traders” (and creditors generally) to pass a ‘fit and proper person’ test, and register on the Financial Service Providers Register under the Bill.
Making sure people know where to go for help
- Some lenders contact borrowers who are struggling with making repayments and put them in touch with financial mentors, who can help them get on top of their debt.
- All lenders are now being encouraged to do the same. The Government is proposing to make this a legal requirement on all lenders in the future, “if needed”.
The proposed new protections will be considered by Parliament. If passed, the interest and fee cap will come into force on 1 June 2020. It will apply to all new loan agreements made from that date. It will also apply to existing agreements if they are varied on or after that date.
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