Intent of the Act
When you borrow money, the Credit Contracts and Consumer Finance Act (CCCFA) Act ensures you are able to make informed choices, know what you're agreeing to, and can keep track of your debts.
The CCCFA requires lenders to act responsibly at all times. It provides protection when you:
- take out a personal loan or mortgage
- use a credit card
- borrow money on an agreed overdraft
- buy products and services on credit (sometimes called hire purchase).
Credit Contracts and Consumer Finance Act (CCCFA)(external link) — Legislation.govt.nz
Hire purchase and buying on credit
Different laws apply to other types of contracts, eg gym memberships or quotes. Read your rights and definitions of common contract words and phrases:
Contracts and sales agreements
Your rights under the CCCFA
What lenders must tell you (disclosure)
There are certain things lenders have to tell you when you borrow money. This is called disclosure of information.
For example, lenders must:
- make standard terms and costs of borrowing publicly available via their website or on clearly displayed notices at their premises. This helps borrowers compare the cost of borrowing and contract terms, and to shop around.
- give you important information in writing before you sign an agreement, eg annual interest rate, all fees, how you can cancel, details of their dispute resolution scheme.
Lenders must make disclosures to you:
- before the credit contract is signed
- when guarantors sign
- if the interest rate or the contract changes by agreement or by the lender
- every 45 days for revolving credit contracts
- at least every six months for all other credit contracts
- when you ask for it.
Lenders who do not make proper disclosure cannot enforce their contracts until disclosure is made.
Disclosure of information must:
- be clear and concise
- be likely to be noticed by a reasonable person
- not be misleading or deceptive about important things.
You have to consent to having information disclosed electronically, eg by email, instead of on paper.
Credit contracts: Plain English definitions
Disclosure for lenders guidelines(external link) — Commerce Commission
Sample disclosure statements
These documents are a guide for what to expect from your lender:
Model disclosure statement for consumer credit contracts [DOCX, 33 KB]
Model disclosure statement for revolving credit contracts [DOCX, 34 KB]
Interest, fees and charges
The Credit Contract and Consumer Finance Act (CCCFA) sets out how interest (including any default interest) is to be calculated. This must be disclosed in the contract.
The CCCFA also limits how much lenders and mobile traders (eg truck shops) can charge in interest and fees in high-cost loans:
- Lenders cannot ask you to pay back more than twice the amount borrowed (also called the principal).
- They cannot charge compound interest.
- They cannot charge more than 0.8% of the unpaid loan balance in interest and fees per day when averaged across the loan term.
- Default fees for missed payments must be $30 or less.
Interest may not be charged in advance. It is usually calculated by applying the daily interest rate to the daily unpaid balance.
A default interest rate is a higher interest rate charged if you miss payments or go over your credit limit. It can only be charged while you are overdue and on the amount of missed or over-limit payments, not on the whole amount of the loan.
Credit fees and early repayment fees are not interest charges. These fees must:
- be reasonable
- cover costs closely related to the reason for the fee, eg admin costs, losses from early repayment.
- earn a profit from fees
- charge borrowers commission under credit-related insurance if they required the borrower to get insurance from a particular insurance company.
Any unreasonable fees can be challenged in court and either cancelled or reduced.
You have the right to request changes to a credit contract if unforeseen circumstances cause hardship, eg illness, injury, loss of employment, or the end of a relationship.
You can only make one hardship application on the same grounds within any four-month period, unless the lender agrees to consider another application.
You can make a hardship application in writing at any time. You must bring your payments up to date before applying for hardship if you have:
- been in default for two months or more
- been in default for two weeks or more after receiving a repossession warning notice or Property Law Act notice
- not made four or more consecutive debt repayments on their due dates.
In your application, you can ask for one of these changes:
- extend the contract term by reducing the amount of each payment
- postpone payments for a set period (payments holiday)
- extend the term of the contract and postpone debt repayments for a specified period of time (payment holiday).
The lender has to:
- acknowledge requests for hardship within five working days
- ask for more information within 10 working days if they need it
- make a decision within 20 working days
- comply with the lender responsibility principles.
You can apply to the Courts if the lender refuses your request.
Applying for hardship(external link) — Commerce Commission
A lender can only begin the process to repossess something if:
- the contract provides for the right to repossess
- the item is subject to a security interest and has been specifically identified in the contract, and
- the borrower is in default (has missed payments and owes money to the lender).
The lender must give you written warning in advance that they intend to repossess an item.
The rules are slightly different if the lender has reasonable grounds to believe the item is at risk of being disposed of, damaged or destroyed.
Repossession guidelines(external link) — Commerce Commission
A prepayment is a payment made before it's due.
A lender must:
- accept a full prepayment (paying off the whole item early)
- only refuse part prepayments (paying instalments or parts of instalments early) if allowed by the contract.
Lenders are allowed to charge early repayment fees for prepayments.
Cancelling your credit contract
At the start of a loan you have a five working days to cancel the loan contract in writing or electronically. This is called a cooling-off period.
The cooling-off period is extended to:
- seven working days if the documents were sent to you by email or fax
- nine working days if the documents were posted to you.
Saturdays, Sundays and public holidays are not working days.
You can cancel a credit contract at any time if no disclosure was made.
The Act protects you from oppression. Oppression is extremely unfair or unreasonable:
- terms in a contract, or
- behaviour from a lender.
Whether something is oppressive is determined by a court.
What lenders must do
When the CCCFA applies
The CCCFA covers a range of transactions where money is loaned for personal use, including:
- Consumer credit contracts — a contract where a borrower is given credit for personal use, eg through a mortgage, credit card, arranged overdraft, personal or cash loan, or pawnbroking pledge
- Consumer leases — a lease contract where someone is leasing goods for personal use and either has an option to purchase the leased goods, or the term of the lease is over one year
- Buy-back transactions — where a homeowner transfers their home (or an interest in their home) to a transferee, who typically pays their debts or gives them money. The former homeowner (the occupier) has the right to continue living in the home and to buy it back at some time in the future.
The Act covers all other credit transactions, including business transactions, by protecting borrowers from oppressive behaviour by lenders.
The Act applies to people or businesses who:
- provide credit, including insurance companies, finance or mortgage brokers, and paid advisers
- lease out goods
- operate or promote buy-back schemes.
AfterPay, PartPay and other "buy now, pay later" credit contracts are not currently covered by the CCCFA.
When the CCCFA doesn't apply
Credit contracts not covered by the CCCFA
A contract is not a consumer credit contract when:
- the credit is for commercial or investment purposes — lenders may get a declaration from customers that the credit is for business or investment
- the total amount to be paid is due within two months and the debt equals the sale price of the products or services
- a borrower goes into overdraft without the lender’s prior agreement
- the borrower is acting as a trustee of a family trust
- it is a student loan under the Student Loan Scheme.
If a lender uses another reason to say the CCCFA does not apply, this might be a breach of the Fair Trading Act.
If things go wrong
Contact your lender
If it's difficult to keep up with your payments, ask about changing the agreement, eg to pay less each month. This is called applying for hardship.
If you think your lender has acted unfairly, try to resolve it with them first.
Report a lender to the Commerce Commission
The Commerce Commission is responsible for enforcing the CCCFA. Reports from the public help it identify lenders suspected of regularly breaking the rules.
Under the Credit Contract and Consumer Finance Act a lender must comply with disclosure obligations and determine affordability and suitability of the loan. Failure to do so can result in a refund of interest and fees and or damages to the borrower.
Making a complaint(external link) — Commerce Commission
The Commission can investigate lenders and take steps to ensure they stick to the rules by either:
- giving advice on how to comply with the law
- issuing warnings
- taking the lender to court.
The Commission can't act on your behalf about your specific issue. If you can't resolve the issue with your lender, complain to the lender's dispute resolution scheme.
Complain to the lender's dispute resolution scheme
All lenders must be members of a dispute resolution scheme under the Financial Service Providers (Registration and Dispute Resolution) Act. These schemes are independent, which means they have to be fair in resolving any disputes.
To find out which scheme a lender belongs to, search the Financial Service Providers Register.
Financial Service Providers Register(external link) — Companies Office