The law change introduces limits on how much high-cost lenders can charge in interest and fees. High-cost loans are defined as loans where the annual interest rate is higher than 50%.

Truck shops and other mobile traders are now covered by the CCCFA. Like other lenders, they must follow responsible lending rules, including:

• Check if the amount to borrow meets your needs.
• Make sure you can afford repayments.
• Limit interest and fees.

Lenders cannot ask you to pay back more than twice the amount borrowed (amount borrowed is also called the principal) in a high-cost loan entered into after 1 May 2020. For example, if you borrow $300 from a high-cost lender, you should not have to pay back more than $600 in total.

Other changes to the CCCFA mean:

• Lenders cannot charge compound interest on high-cost loans — they can only charge interest on the amount borrowed, not on the amount borrowed plus interest.
• Lenders cannot charge more than 0.8% of the unpaid loan balance in interest and fees per day when averaged across the loan term.
• Default fees for missed/late payments on high-cost loans must be $30 or less.

If you do pay more, you can ask the lender for a refund.

Before borrowing from a high-cost lender, it’s a good idea to explore other options:

Talk to a free financial mentor at MoneyTalks — call 0800 345 123.

Good loans(external link) — Good Shepherd New Zealand

Help with living costs(external link) — Work and Income