To protect people from excessive interest and fees on credit contracts, the Government has updated the Credit Contract and Consumer Finance Act (CCCFA).

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

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