Protecting borrowers through responsible lending

  • Craig Foss
Consumer Affairs

A Bill that will strengthen protections for borrowers and make wide-ranging changes to consumer credit and repossession laws has passed its first reading in Parliament today.

Consumer Affairs Minister Craig Foss says the Credit Contracts and Financial Services Law Reform Bill is the largest overhaul of consumer credit law in a decade.
“The Bill will crack down on unscrupulous lenders who leave borrowers and their families trapped in a spiral of uncontrolled debt,” says Mr Foss.

“The changes will require all lenders to act responsibly, and provide consumers with the information they need to properly consider any loan agreement.

“This rewrite of consumer lender rules is an important part of the Business Growth Agenda, which aims to boost confidence in our financial markets,” says Mr Foss.

Changes proposed in the Bill include:

  • Making it illegal to lend money to someone whose loan repayments would be likely to result in substantial hardship
  • Requiring lenders to properly consider applications by borrowers for hardship relief
  • Requiring more timely and complete disclosure of loan terms, and extending the ‘cooling off’ period for borrowers to cancel their loan
  • Better controls against misleading, deceptive or confusing advertising
  • A new Code of Responsible Lending which will allow for lenders to be banned from the industry for non-compliance
  • Providing that borrowers won’t have to pay the cost of interest or fees if their lender is not a registered financial service provider
  • Preventing goods from being repossessed unless they are specifically identified in the credit contract and limiting essential household items from being listed as securities
  • Licensing of repossession agents and employees
  • Strengthening powers to prevent certain entities or individuals from becoming registered financial service providers or to revoke their registration.

For more information about the Bill visit www.consumeraffairs.govt.nz/legislation-policy/policy-development/credit-review