Find out what a consumer credit contract is and your rights with them.

Consumer credit contracts

You are given credit when you have the right to:

  • pay off an existing debt or incur a debt and not pay it off straight away
  • purchase products or services and not pay for them immediately (credit sales).

You have special rights when you enter into a consumer credit contract such as a:

  • mortgage
  • credit sale (used to be called hire purchase)
  • credit or store card
  • personal cash loan
  • an agreed overdraft.

A consumer credit contract is an agreement where you borrow money or buy products on credit for your personal use and the lender takes an interest charge, credit fees or a security interest. The lender must also be a business that regularly provides credit, such as a finance company or their agent/broker.

Product leases that meet these criteria are also included if:

  • the amount payable under the lease is equal to or greater than the cash price of those products
  • there is an option for you to buy the products at no extra cost or for a small amount substantially below the market value of those products.

Credit approval

It is up to the lender (also called a creditor) to decide on the criteria you must meet to get credit approval. These can include:

  • your previous credit history
  • your current ability to pay and income
  • whether you have any other outstanding debt.

Read Your credit record to find out more.

Lenders will sometimes get you to sign to say that the credit is being used mainly for business or investment (if this is the case), before you enter into a credit contract.


A credit fee is any extra charge a lender may add to the amount you have borrowed under a credit contract, such as prepayment fees or establishment fees.

Interest is the amount a lender charges you for the use of their money. There is no limit on interest rates that can be charged, but the law does set rules about how interest is calculated.

A security interest in products or property allows lenders to secure repayment of the credit contract by selling the products or property. They can then use the proceeds to repay the loan.

Read Secured loans to find out more.

Note: The law changed for credit contracts in relation to security and repossession from 6 June 2015. The new law only applies to contracts entered into after that date. Read the Commerce Commission’s fact sheet on how the changes to consumer law apply to contracts(external link) .

Not a consumer credit contract

These situations do not qualify as consumer credit contracts:

  • the buyer of products on credit is a business or the products are to be used commercially
  • layby sales and consumer leases
  • credit sales where you can pay in full for products or services within two months
  • overdrawn bank accounts without an agreed overdraft facility in place
  • credit is provided by someone who does not usually provide credit.



Know your rights

You have specific rights to protect you when you enter into consumer credit contracts such as mortgages, agreed overdrafts, personal loans, credit sales and credit card purchases, under the Credit Contracts Consumer Finance Act (CCCFA). You can apply to have these contracts varied or cancelled if any of these rights are breached, and sometimes the costs of credit can’t be enforced.

You have slightly different rights with consumer leases and pawnbroking contracts under the CCCFA.

Your rights with consumer credit contracts under the CCCFA include:

  • disclosure of key information: what you need to know before and during the credit contract term. See the model Disclosure statement for consumer credit contracts [DOCX, 33 KB]
  • interest charges: how these are charged, total interest, any interest-free period and reasonable default interest charges (higher rate applied, but only to the amount in arrears). A lender can’t charge interest in advance
  • early repayment: any prepayment fees (break fees) must be reasonable
  • other fees must be reasonable, such as credit fees for establishment, default fees for not meeting the contract’s terms, and third-party fees such as broker charges
  • credit-related insurance to cover illness and redundancy; a lender may not be unreasonable about any terms on which you take this out
  • cancellation: you have various cooling-off periods to change your mind
  • applying for hardship: you can apply for a payment holiday or change your credit contract if you experience unexpected hardship
  • oppression: lenders may not act in a way that is harsh, very unfair or that doesn’t meet reasonable standards of commercial practice; and may not include oppressive terms in the credit contract
  • Lender Responsibility Principles and the Responsible Lending Code [PDF, 395 KB] : lenders must comply with these principles when providing credit, including treating you ethically and reasonably.

‘Reasonable’ in relation to default interest charges and all other fees must reflect the lender’s actual costs incurred, or a reasonable estimate of that loss, and conform to standard commercial practice.

Lenders who provide credit also fall within the legal scope of financial advisors. They must be registered on the Financial Service Provider Register(external link)  and belong to an independent dispute resolution scheme.

If not, they can’t enforce any of their rights to recover the cost of borrowing or make you repay your debt during the time they are unregistered.

Read Getting financial advice to find out more.

Lender responsibility

New Lender Responsibility Principles and the Responsible Lending Code [PDF, 395 KB] apply to all lenders. Lenders must:

  • exercise the care, diligence and skill of a responsible lender in all their dealings with you
  • be satisfied that you can afford to borrow the loan amount and make repayments without suffering substantial hardship
  • help you make an informed decision about whether to take out a secured loan, as well as all subsequent dealings
  • make sure that loans are not oppressive. Charging excessive interest rates when taken together with other factors may indicate oppression. Some of these factors are set out in the paragraph on oppressive terms
  • must not exercise their rights oppressively.

Lenders need to make sure a loan meets your needs and that you can afford repayments without undue hardship.

Oppressive terms

‘Oppressive’ terms or behaviour include being harsh or in breach of reasonable commercial practice. Other factors that may be taken into account include:

  • relative bargaining strengths of both parties, including skills, experience, access to resources and advice. Taking advantage of a vulnerable borrower may indicate oppression
  • the complex nature of any credit contract and whether you got legal advice or could afford to do so
  • when exercising lender’s rights, the period given to you to remedy any default, whether the amounts demanded are in fact correct and whether the lender’s actions are lawful.

Find out more in the Commerce Commission’s factsheet on Oppression(external link) .

Other rights

You also have rights as a consumer under the Consumer Guarantees Act. In particular, lenders must provide credit services to you with reasonable care and skill. They must also comply with all the rules under the Fair Trading Act (FTA) and not mislead or deceive you.

For more information read the Commerce Commission’s guidance on fees a lender may charge(external link) .

Consumer leases

Consumer leases are leases of products for personal, domestic or household use, but with no interest, credit fees or express security interests. Consumer leases must either:

  • last for more than 12 months and the amount payable is less than the cash price of the products
  • give you the option to buy the products at a price which is the fair value of the products.

Consumer leases are treated separately to consumer credit contracts. Your rights are reduced in that:

  • lenders don’t have to tell you as much about the contract (disclosure)
  • you have no right to cancel a consumer lease after receiving initial disclosure
  • you can’t ask for changes to the contract on the grounds of hardship.

Pawnbroking contracts

Pawnbrokers lend money on the security of your goods (based on their market value) which you leave at their shop for a set period eg, three months. If you don’t repay the loan (including interest and fees) and pick up the goods by an agreed date (redemption date), they can only sell them after this date and keep the redemption price.

Pawnbroking contracts are also treated differently to other consumer credit contracts. Your rights are limited to:

You have different options if:

  • you are struggling with your loan repayments
  • a term of the loan contract is too harsh, or the lender acted oppressively
  • you were given incomplete or inaccurate information before or during the credit contract (disclosure).

Contact a budget adviser if you are struggling to meet your financial obligations to get some budgeting advice.

Contact the finance company

Contact the finance company as soon as possible to vary or cancel the contract under the Credit Contracts Consumer Finance Act (CCCFA) if you did not get full or accurate disclosure.

If you are struggling to pay, you can also apply for a hardship assistance. The lender can agree to:

  • reduce the amount you pay by spreading payments over a longer period
  • let you take a payment holiday until a future date when you can start paying again.

If the lender acted oppressively or breached the Lender Responsibility Principles, you can apply to court to get the credit contract varied and make other orders against the lender, such as the payment of money. But do so promptly as the time limit for applying to reopen a credit contract is one year from the date of performing the last obligation under the contract (or three years for buy back arrangements).

If your concern or difficulty is not resolved to your satisfaction, you can then contact the Financial Dispute Resolution Scheme(external link) that your lender belongs to.

See also:

Next steps

If you are unable to resolve your issue directly with the lender or their dispute resolution scheme, our Resolve It tool has information to help you take the next steps. These may include going to the Disputes Tribunal or District Court.

Resolve it: Banking, finance and insurance

Need more help?

Contact us for more guidance.

Common situations

Gym contracts

Sue joins her local gym and signs up to a two-year contract paid by instalments. Fees are included in the contract. The gym failed to advise Sue of her right to cancel the contract within five working days, when she signed up. So she can cancel the contract at any time as they are in breach of the Credit Contracts and Consumer Finance Act (CCCFA).

Struggling to repay a car loan

John is having a problem repaying his car loan because he was made redundant two months ago and is now working part-time. John can apply to the finance company for hardship assistance, which may mean he can pay off the debt in smaller amounts or take a repayment holiday until he can afford to repay more.

Lender acting unfairly

Margaret defaults on her car loan once as she has other bills piling up. She contacts the finance company, which gives her two days to repay the whole car loan or else it will start repossession. Margaret thinks this is unfair and gets advice from the Citizen’s Advice Bureau to challenge this conduct as being oppressive.