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Banks and other lenders can charge fees. What's fair and when do common fees apply?

If a fee seems unfair or incorrect, question your lender but make sure you pay it before the due date. They may decide to give you a full or partial refund.

Take your complaint further if needed. The lender's dispute resolution scheme may order it to refund fees. You may also be awarded compensation or have your credit contract cancelled if it's extremely unfair.

It's a bad idea to simply not pay the fee. Your debts will mount up. And non-payment can count against you if the problem goes to a dispute resolution scheme or court.

If an unfair fee is in your loan agreement, contact your lender to have it changed. If they don't agree, complain to their dispute resolution scheme.

Credit contracts: Plain English definitions

Example — Unfair admin fee

Ashton takes out a $4,000 loan with a $120 monthly admin fee. Ashton soon falls behind on repayments. Keen to get his debts under control, Ashton talks to a free financial mentor. The mentor thinks the admin fee is too high, so calls the lender to challenge it. But the lender refuses to reduce it — it's in the contract and Ashton signed it.

The mentor then complains to the lender's dispute resolution scheme. It investigates and finds admin costs are closer to $40 a month. The lender is ordered to cut its fee and refund Ashton the difference on any admin fees he's already paid. Ashton also complains to the Commerce Commission as other customers probably face similar fees.

Common fees lenders can charge

It's fair for lenders to ask you pay the fees and other costs listed on this page, so long as:

  • it's an amount that covers costs but makes no profit
  • daily costs are no more than 0.8% of the unpaid loan balance in interest and fees
  • you are given clear and accurate information about fees and when they will be charged, eg in your credit contract
  • you are treated fairly by the lender and any of their agents, eg debt collector.

These rules are in the Credit Contracts and Consumer Finance Act (CCCFA).

Daily costs

The daily cost is the amount high-cost lenders charge each day for providing credit. It affects how fast your debt grows.

It’s a percentage of the loan’s unpaid balance, and includes:

  • credit fees
  • interest
  • charges for optional services
  • other fees passed on by your lender.

The CCCFA limits daily costs to no more than 0.8% of the unpaid balance in interest and fees per day when averaged across the loan term.

Lenders must also act promptly if you fall behind on payments — it's unfair to let even fair fees and interest build up over time.

To get an idea of a fair amount for a fee, check what other lenders charge. Is it within this range, or much higher?

What lenders must do

Fees a lender may charge(external link) — Commerce Commission

When it's charged: At the start of a loan or credit contract. It covers the lender's admin costs in setting up a loan, eg affordability assessments and writing loan documents. For vehicle finance, both the car dealer and finance company may charge set-up fees. This is allowed, so long as you are not charged twice for the same work, eg finance company's fee covers work done by the dealer.

What you could be charged:

  • lender's set-up fee
  • if a broker is involved, the lender can pass on their fee to you but it must be at cost (without profit).

If a broker's fee seems too high, complain to your lender. If this doesn't work, complain to the lender's dispute resolution scheme. Also report the high fee to the Commerce Commission.

When it's charged: If your bank account dips below $0 — or past an agreed overdraft limit — without the bank first approving it.

What you could be charged:

  • fee when your balance dips below $0 or your overdraft limit
  • default interest on the overdrawn amount.

When it's charged: If you don't have enough money in your bank account to cover a payment.

What you could be charged:

  • dishonour fee if the bank doesn't make the planned payment
  • honour fee if the bank makes the payment despite your low account balance.

You may also be charged default interest.

When it's charged: If you fail to keep repayments up to date, or if your bank balance falls below $0, or the agreed overdraft limit.

Depending on your lender and your payment history, you might have a short time to pay what you owe without being charged default interest.

What you could be charged:

  • default interest on the amount you fail to pay back or are overdrawn.

Default interest is higher than your usual interest rate. It might be calculated daily, so can stack up quickly.

When these are charged: When you fail to pay what you owe. Some default fees are charged as soon as your payment is overdue. Others come later, usually if you take no steps to get payments up to date.

What you could be charged:

  • late payment (default) fees — these must be $30 or less for high-cost loans
  • fee if you get a demand notice (also called a warning notice), which warns any loan security may be repossessed
  • fee if a warrant to repossession is issued.

You may also be charged default interest.

When it's charged: You repay a loan in full before the final payment is due. Examples include paying off a car loan early, or switching to a new mortgage deal partway through a fixed-term deal.

What you could be charged:

  • admin fee
  • extra costs if your lender loses money because of market interest rate changes since your loan was set up.

These extra costs can be high, so make sure you get a quote from your lender before finalising the break or full repayment.

Lenders often use a complex equation set out in the Credit Contracts and Consumer Finance Act to calculate any losses. If they use a different method, it must still be a reasonable estimate of any losses. Details should be in your credit contract or loan agreement.

Fees others might charge

When these are charged: When a lender engages a person or agency that specialises in chasing unpaid debts. Some debt collectors act for the lender. Others buy your unpaid debt from the lender, meaning they take over as your creditor.

What you could be charged:

  • debt collection fees
  • any repossession fees if the debt collector is your new creditor.

You must be told at the start that debt collection fees may be charged, eg in a loan contract, store display or on the back of a ticket. Fees must be reasonable (cover costs only) if the debt collector is your new creditor.

For fee information if the debt collector is acting on behalf of your lender, see:

Debt collection fees

If your unpaid debts end up in court, only the court itself can decide if you or the lender/debt collector must pay legal costs.

When these are charged: You become insolvent. Your debts are frozen or written off, but there are extra costs you must pay to the Insolvency and Trustee Service.

What you could be charged:

  • application fee
  • admin costs while you are insolvent.

Amounts vary, depending on the type of insolvency, eg debt repayment plan (also known as a summary instalment order or SIO), no asset procedure or bankruptcy.

Bankruptcy and insolvency options

If things go wrong

If you think a fee is too high, or should not be charged, follow these steps — you might not need to do all three:

  1. Contact the lender/debt collector: Talk to the bank or finance company as soon as possible. Many issues can be solved at this step.
  2. Contact the lender's dispute resolution scheme: Get independent help if you and the lender can't agree.
  3. Report it to the Commerce Commission: This government agency gathers information to take action against lenders and debt collectors who break the rules. It doesn't take on individual cases.

Payment problems

1. Contact the lender

Before you make contact, read our information on:

  • your rights
  • how to complain.

A free financial mentor can help you prepare, or can talk to the lender for you. Start by contacting the free helpline MoneyTalks.

Contact information(external link) — MoneyTalks

  • Check your credit contract — this should list all fees, and explain when you might have to pay these costs.
  • Gather proof, eg if fee amount is more than what's listed in your contract or on their website, differences between your lender's fees and most others.
  • Think about what you will say, making notes with points you want to cover.
  • Decide your ideal outcome, egreduce or cancel the fee.

During the conversation:

  • Take notes — include dates and what was said. If you need to take your complaint to the dispute resolution scheme, this will be helpful proof.
  • Stick to the facts — explain the problem and share any proof.
  • Say what you want — explain your ideal outcome.
  • Take time out — if it gets heated, or you want to think about their response, arrange a time to call or email back. Explain you need time to digest the conversation.
  • Make it official — if you reach an agreement to reduce or waive (cancel) a fee, get it in writing. It's a good idea to get your contract updated.

Your rights

You must be given fee information in writing, under the Credit Contracts and Consumer Finance Act (CCCFA). Lenders and debt collectors cannot mislead you in adverts and other information under the Fair Trading Act, eg about fee amounts.

You may get a full or partial refund if the lender:

  • didn't tell you about a fee, or the possibility of the fee, before charging you
  • gave incorrect information, eg contract says $25 admin fee but you are charged $75
  • set higher fees so they could make a profit.

Example — Blizzard of 50c texts

Selina's lender offers to send her text alerts. Selina agrees as 50c a text is cheaper than missed payment fees. When a bank fault delays her loan payment, Selina doesn't get just one text alert. She gets 20 in one day, costing her an extra $10. Selina complains to her lender. They will not refund her $10, but agree to send just one text alert in future.

All banks, lenders and financial advisers must belong to a financial dispute resolution scheme. This independent body can:

  • give you information about how lenders should act
  • share tips on how to complain to your lender
  • look into certain complaints when you and your lender cannot agree on a solution.

It's free for you talk to them and make a complaint. Or a free financial mentor can do this for you. Start by contacting the MoneyTalks helpline.

Free confidential advice(external link) — MoneyTalks

There are four financial dispute resolution schemes. To find out which your lender belongs to, you can either:

  • Ask your lender.
  • Phone any one of the four schemes to find out. For contact details, see:

Financial dispute resolution schemes

You can also check the lender's entry on the Financial Service Providers Register.

Search the register(external link) — Financial Service Providers Register

Fee complaints

Fee complaints you can take to a dispute scheme include:

  • lender didn't tell you about a fee (non-disclosure)
  • incorrect fee information
  • transaction problems, eg duplicate transactions, missing money, fees for no service received
  • lender acts unfairly when applying fees, eg too many chargeable text alerts.

Possible outcomes

If the dispute scheme investigates your complaint, it might:

  • Order a refund, eg for all or part of the fees you had to pay.
  • Order a fee reduction to a fair amount.
  • Award compensation, eg for inconvenience, or for missing out on using the money.
  • Report the lender to the Commerce Commission if there's evidence they often break the rules. This sometimes results in the lender reducing the fee for all borrowers.

3. Report the lender/debt collector

The Commerce Commission enforces certain consumer laws, including the Credit Contracts and Consumer Finance Act. This is designed to make sure businesses lend responsibly, eg to check loans are affordable and disclose all interest and fees.

Commerce Commission doesn't act on behalf of individuals and can't investigate every complaint. But their investigations do help make sure businesses comply with the law. Your information helps them assess which consumer issues cause greatest harm.

Make a complaint(external link) — Commerce Commission

More help

Get support at any point from:

  • MoneyTalks: This helpline gives free budgeting advice to individuals, family and whānau. Financial mentors can help you understand your financial situation, organise your debt and plan for the future. They can also put you in touch with a local budgeting service and help with issues you're having with lenders. Phone 0800 345 123, or use live chat, email or text, if you prefer.

Contact information(external link) — MoneyTalks

  • Community Law Centre: Free one-on-one legal advice to people with limited finances. The organisation has 24 community law centres throughout the country. You can find legal information and other resources on its website.

Our law centres(external link) — Community Law Centre