Know your rights
Credit sales, personal loans and mortgages are all consumer credit contracts under the Credit Contracts and Consumer Finance Act (CCCFA). In a consumer credit contract, you are given credit for personal use and have all the consumer protections available under the CCCFA. You are also covered under the Consumer Guarantees Act for rights against the trader or supplier of the products. Sometimes the supplier and the lender may be the same.
When you sign up for a loan or credit sale, the lender must tell you exactly what the cost will be and about any additional charges or fees in a document called the ‘disclosure statement’. They must give you this before the contract is signed for credit contracts after 6 June 2015.
Essential consumer items can't be used for security
With personal loans, never use items for security that are worth more than the loan itself. Certain essential consumer products cannot be used for security. This includes beds and bedding, cooking equipment, medical equipment, portable heaters, washing machines, refrigerators, travel and identification documents, and bank cards.
The credit contract must list all secured goods item by item, and any replacement goods. The list must be clear and written so that the goods can be easily identified. If lenders try to take excessive security worth a lot more than you borrowed, they may be acting oppressively. If lenders want to add specific items after the date of the loan, you must both agree to change the loan to include those specific items and the lenders must provide disclosure about the change.
Previously, finance companies relied on 'all present and after acquired property' (ALPAAP) clauses to try to repossess your possessions, including those acquired after the loan date. This will be more difficult now.
For all consumer credit contracts, you have five working days to cancel the contract from the date of disclosure. You can also cancel at any time if you have not been given full or accurate disclosure, including of your right to cancel.
Special repossession rules apply to protect you when a lender tries to repossess your consumer goods, if you are in default.
Disabling devices, also called immobilisers, can be attached to consumer products such as vehicles (except for essential consumer items), and are legal if the lender has a security interest in those items. The lender can only activate the device if:
- you have breached the terms of the credit contract sufficiently to allow for activation
- you have been given reasonable notice in advance of the activation and told what action you may take to prevent the device being activated
- despite being given notice, you don’t take those steps.
Lenders provide a consumer service and must provide credit with reasonable care and skill under the Consumer Guarantees Act. If you have a problem with the products, go back to the retailer to get this fixed – but don’t stop your loan repayments.
Read Cancelling your credit contract to find out more.
Lenders also must comply with all the rules under the Fair Trading Act (FTA) and not mislead or deceive you.
If you are having trouble making payments in time and you do nothing, the lender may be able to repossess any items you bought using credit or listed as security for a loan. You need to contact the lender immediately to ask for a change to the terms of your credit contract.