Know your rights
As a guarantor, you have specific rights to protect you under the Credit Contracts Consumer Finance Act (CCCFA). This includes the Lender Responsibility Principles. Lenders must:
- make reasonable enquiries, before a guarantee is given, to be satisfied that a guarantor will be able to comply with the guarantee without suffering substantial hardship
- assist guarantors to reach an informed decision about whether or not to give the guarantee
- assist guarantors to be reasonably aware of the full implications of giving the guarantee.
The lender must also:
- treat the guarantor reasonably and ethically before and during the period of the guarantee and if the credit contact is breached
- make sure the guarantee is not oppressive or act in an oppressive way to get a guarantor to sign
- comply with the Fair Trading Act and not mislead or deceive guarantors in any way
- comply with the Consumer Guarantees Act so that their services meet all the guarantees.
If you were pressured into signing a guarantee by the lender or you were misled about what you were signing, you can apply to have the guarantee cancelled.
What the lender must tell you
The lender must give you, as the guarantor:
- a copy of the key information provided to the borrower
- a copy of the guarantee’s terms.
This information must be clear, concise and understandable for a reasonable person. It should not mislead or deceive a reasonable person.
Both documents must be given or sent to the guarantor before the guarantee is given.
If the guarantee also applies to later contracts made with the borrower, the lender must provide you with this information within 5 working days after the date of the new contracts.
If a lender and a borrower agree to change a consumer credit contract, the lender must disclose those changes to you within 5 working days if the change:
- increases the borrower’s obligations or
- reduces the borrower’s time to pay.
The same applies if the lender is able to make unilateral changes.
If a lender transfers a consumer credit contract to another lender, the previous lender must give you information about the new lender within 10 working days of that change including:
- the date the consumer credit contract was or will be transferred to the new lender
- the impact (if any) on the borrower.