Rules banks and other lenders must follow to make sure loans and credit are affordable and meet your needs.

Key rules for lenders

Lenders must act in line with responsible lending principles set out in the Credit Contracts and Consumer Finance Act (CCCFA). It applies to those who provide mortgages, loans, agreed overdrafts, and buying on credit, including truck shops. It also covers consumer leases and home buy-backs.

Responsible lending covers everything lenders do, from adverts to loan agreements, affordability assessments to limits on interest and fees. 

The most important requirements say lenders must:

  • Comply with disclosure obligations.
  • Ask detailed questions about your income, expenses and current circumstances, including any likely changes to the income you’ll rely on to repay the loan.
  • Ask what the loan is for to make sure they provide the right type of finance.
  • Conduct an affordability and suitability assessment to check the loan or credit meets your needs and make sure you can afford repayments.
  • Help you understand what you are signing up to before you sign.
  • Limit interest and fees for high-cost loans (loans with 50% interest per annum or more) — they cannot ask you to pay back more than twice the amount borrowed, they cannot charge more than 0.8% of the unpaid loan balance in interest and fees per day when averaged across the loan term, and cannot charge compound interest.
  • Treat you fairly — this includes how the lender behaves when you can't pay. Default fees for missed payments must be $30 or less for high-cost loans, unless the lender can justify a higher amount.

If a lender breaks these rules, apply to your lender to have your contract changed or cancelled. If they don't agree, complain to their dispute resolution scheme.

Lender responsibility principles 

What you can expect from your lender(external link) — Commerce Commission

Lenders who provide credit must also:

  • Be registered — check the Financial Service Providers Register.
  • Belong to an approved independent dispute resolution scheme.

Unregistered lenders cannot make you pay interest, default fees and other costs of borrowing. They must register to gain this right, but can only make you pay borrowing costs for the time they are registered.

Financial Service Providers Register(external link)  — Companies Office

If you are struggling to pay, talk to your lender. They might agree to change your payments.

Payment problems

Responsible Lending Code – current

The code guides lenders on how to put lender responsibility principles into practice. It's a complex document aimed at businesses that provide loans and credit.

You can find the summarised principles, and how they apply to you as a consumer, on this page without reading the code in full.

Find the full Responsible Lending Code, or previous versions and addendums on the MBIE Document Library: 

Responsible Lending Code(external link)  — MBIE website

In June, MBIE issued some additional guidance that sits alongside the Responsible Lending Code. This guidance covered situations where an existing consumer credit contract is varied or replaced for the purpose of reducing a borrower’s financial difficulties brought on by the economic or health impacts of COVID-19. This excludes brand new lending.

The addendum expired on 31 March 2021.

Updated Responsible Lending Code – from 1 December 2021

An updated version of the code has been issued, to support recent law changes. The law changes and most of the updated code will take effect from 1 December 2021. 

Note that Chapter 12 of the updated code will come into force on 1 February 2022. Until this date, Chapter 12 of the previous version of the Responsible Lending Code remains in force.


Lender responsibility principles

Lender responsibility principles protect your rights when you:

  • borrow money or buy on credit
  • act as a guarantor for someone's loan or credit contract
  • buy credit-related insurance, eg payment protection, mechanical breakdown insurance added to car finance.

If your lender has not followed the principles explained below, complain first to the lender. If you can't agree a solution, complain to the lender's dispute resolution scheme.

The principles say lenders must:

Example — Lender acting unfairly

Maggie misses one of her car loan payments. She can't afford the missed payment and late fee until she gets her wages next week. She tries to explain this to her finance company. But they threaten repossession unless she pays off the whole loan within two days. Maggie calls the MoneyTalks helpline and is paired with a free financial mentor.

The mentor talks to the lender on Maggie's behalf, pointing out this is an extreme reaction to a missed payment. It could be oppressive conduct, which is illegal. The lender backs down. Maggie makes the missed payment on her payday.

Financial dispute resolution schemes

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

  • give 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 schemes:

To find out which your lender belongs to, ask your lender or check:

  • lender's website
  • your credit contract, in a section called "dispute resolution"
  • lender's entry on the Financial Service Providers Register.

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

You can also phone any of the financial disputes schemes — they will tell you which one to contact.

Possible outcomes

If the dispute scheme investigates your complaint, it might decide the lender should:

  • Change your contract: A common option is to agree a new payment plan that you can afford.
  • Reduce how much you owe: Some fees or interest might be refunded.
  • Lower the interest rate.

It's up to you — not your lender — to accept or reject the scheme's decision. If you don't accept it, you can take your complaint elsewhere, eg District Court.

If things go wrong

If you think your lender or debt collector has acted unfairly, follow these steps — you might not need to do all three:

  1. Contact the lender: 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: If you and the lender can't agree, get independent help to solve the problem.
  3. Report the lender to the Commerce Commission: This government agency gathers information to take action against lenders who break the rules. It doesn't take on individual cases.

The Credit Contracts and Consumer Finance Act changed in June 2015. If your loan agreement started before then, different rules might apply.

1. Contact the lender

If a lender or debt collector seems to have acted unfairly, you can apply to have your contract changed or cancelled.

Before you make contact, read our information on how to complain.

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

Contact information(external link) — MoneyTalks

2. Contact lender's dispute resolution scheme

All banks, lenders and financial advisors must belong to a financial dispute resolution scheme.

To find out which your lender belongs to, phone any one of the four schemes to find out. For contact details, see:

Financial dispute resolution schemes

3. Report the lender

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 for people with limited finances. The organisation has 24 centres throughout the country. You can find legal information and other resources on its website.

Our law centres(external link) — Community Law Centre