What lenders must do to ensure your credit or loan arrangement is affordable and suitable for your needs.

Ensuring credit and loans are suitable for borrowers

Lender Responsibility Principles make clear the responsibilities of lenders or creditors, specifically on the affordability of credit and whether it is suitable for the borrower’s needs. The principles apply to all consumer credit transactions apart from consumer leases. 

Responsible Lending Code

The Responsible Lending Code is a guide for lenders on how to comply with the Lender Responsibility Principles, which was developed by the Ministry of Business Innovation and Employment (MBIE). It can be used by lenders to show they complied with the principles and did not act oppressively.

Read the Responsible Lending Code [PDF, 395 KB].


General principles

Every lender must exercise the care, diligence, and skill of a responsible lender:

  • when advertising
  • before agreeing to provide credit or finance or taking guarantees, and
  • in all subsequent dealings with borrowers and guarantors.

Lender's responsibilities

Lenders must:

  • Make reasonable enquiries before entering into a loan (or taking a guarantee) to be satisfied that:
    • the credit provided will meet the borrower’s needs and objectives
    • the borrower or guarantor will be able to make the payments under the loan, or comply with the guarantee, without suffering substantial hardship. 
  • Help borrowers and guarantors to make informed decisions

  • Help borrowers decide whether to enter into the agreement, agree to variations or any later decisions and to be reasonably aware of the contract’s effect by making sure:
    • advertising is not likely to be misleading, deceptive or confusing to borrowers
    • the contract’s terms are expressed in plain language in a clear, concise and intelligible way
    • information is not presented in a way that is likely to be, misleading, deceptive or confusing.
  • Act reasonably and ethically:
    • when breaches of the loan occur or when other problems arise
    • when a borrower suffers unforeseen hardship
    • during repossession including:
      • taking all reasonable steps to ensure goods and property are not damaged
      • adequately storing and protecting repossessed goods
      • not exercising the right to enter premises in an unreasonable manner.
  • Not use oppression in dealings with borrowers:
    • to ensure contracts are not oppressive
    • their lending powers are not exercised in an oppressive manner
    • borrowers are not induced into contracts by oppressive means. 
  • Comply with all of their other legal obligations to borrowers. This includes:
    • following the rules about disclosure, credit fees, unforeseen hardship applications, and credit repossession in the Credit Contracts and Consumer Finance Act
    • not making false or misleading representations or including unfair contract terms as required by the Fair Trading Act
    • carrying out their services using reasonable care and skill, as required by the Consumer Guarantees Act

Responsibilities when selling credit-related insurance to borrowers

When the insurance is arranged by the lender, they have to:

  • make reasonable inquiries before an insurance contract is signed
  • ensure the policy is likely to meet the borrower’s requirements and that payments will not cause substantial hardship.

The lender can rely on information the borrower provides, unless the lender has reasonable grounds to believe the information is not reliable.

  • Assist borrowers to make informed decisions about buying that insurance and to be reasonably aware of the full implications of doing so. This includes making sure:
    • any advertising distributed by the lender is not likely to be, misleading, deceptive or confusing to borrowers
    • information is not presented in a misleading, deceptive or confusing manner

Responsibilities to guarantors

Lenders need to:

  • Make reasonable inquiries, before guarantees are given, that guarantors can likely comply without suffering substantial hardship. The lender can rely on information the guarantor (or borrower) provides, unless the lender has reasonable grounds to believe the information is not reliable. 
  • Assist guarantors to reach informed decisions about agreeing to the guarantee and to be reasonably aware of the full implications of doing so. This includes making sure:
    • any advertising distributed by the lender is not likely to be, misleading, deceptive or confusing to borrowers
    • information is not presented in a misleading, deceptive or confusing manner.

  • Treat guarantors reasonably and in an ethical manner. This includes when the debtor defaults or when other problems arise. 
  • Not use oppression in dealings with guarantors:
    • to ensure contracts are not oppressive
    • their lending powers are not exercised in an oppressive manner
    • guarantors are not induced into guarantees by oppressive means. 
  • Meet all their legal obligations to guarantors.

This includes:

  • following the rules about disclosure, credit fees, unforeseen hardship applications, and credit repossession in the Credit Contracts and Consumer Finance Act
  • not making false or misleading representations or include unfair contract terms, as required by the Fair Trading Act
  • carrying out their services using reasonable care and skill as required by the Consumer Guarantees Act

Remedies if a lender does not comply

If a lender doesn’t comply with any of the principles the Courts can take this into account in deciding whether or not:

  • the lender has acted oppressively under Part 5 of the CCCFA
  • to make any orders for refunds, compensation, exemplary damages or other orders.

It does not, however, make the credit contract or any security interest unenforceable.

Read the Commerce Commission’s factsheet on Consumer credit(external link).


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