Consumer Credit Law Being Reviewed

Minister of Consumer Affairs Heather Roy today released a discussion document - titled the 'Review of the Operation of the Credit Contracts and Consumers Finance Act 2003' - which reviews consumer credit law.

"Credit is an important part of New Zealand's economy as it provides flexibility for consumers to access goods and services and enables increased participation in the market. However, in the current economic climate, many consumers are facing greater challenges in accessing, using and repaying credit," Mrs Roy said.

"This period of economic uncertainty provides a timely opportunity to review our consumer credit legislation. The review will enable us to determine whether the Credit Contracts and Consumer Finance Act (CCCFA) is delivering good outcomes for New Zealanders now, and whether it will continue to do so into the future.

"The Review of the Operation of the Credit Contracts and Consumers Finance Act 2003 outlines several proposals to amend the CCCFA in order to improve its operation.

"The discussion document also looks at other legislative initiatives that have been, or are being, introduced in New Zealand that are likely to affect the operation of our consumer credit market.

"An area I'm pleased to see being addressed is proposed changes to improve access to the hardship provisions when a borrower has difficulty with loan repayments. This has been raised by community organisations who have evidence that consumers miss out on accessing the CCCFA's hardship provisions by being in default of their loan and, so, are unable to effectively negotiate with the lender. The discussion paper suggests a number of ways to address dealing with these concerns.

"Another area of concern is the repossession of goods following default of a credit contract. This seems to be related to overly broad security clauses in credit contracts.

"The paper proposes that property secured against a loan must be specifically defined in a credit contract. This means people entering credit contracts can clearly see what property could be repossessed if they default on the loan.

"Another proposal would require an independent agent - such as a Justice of the Peace or warranted officer - to authorise credit repossessions under the Credit (Repossession) Act.

"I invite comments on the proposed amendments and wider credit issues. Many of these issues will be discussed by representatives of the financial sector, and of community and voluntary agencies, at Friday's Financial Summit, which I will be hosting in Otara, Auckland," Mrs Roy said.

Submissions close on 16 November 2009. The discussion document is available at: www.consumeraffairs.govt.nz.

Background
The Credit Contracts and Consumer Finance Act 2003 (CCCFA) took effect on April 1 2005 and regulates all forms of consumer credit. This includes personal loans, credit sales, hire purchases, credit cards, long term leases, mortgages (home loans) and housing buy-back schemes and therefore affects most New Zealanders.

When the CCCFA was introduced it replaced the existing credit legislation and was intended to provide better protections for New Zealand consumers.

The underlying goal of the Act is to empower consumers by requiring disclosure of key information on credit contracts.

Along with informing consumers, the Act's information disclosure requirements aim to promote competition, efficiency and good practice in the credit market.

The CCCFA also provides lenders with flexibility in setting interest rates and fees.