Credit law changes kick in

Significant changes to consumer credit laws, which build on existing responsible-lending requirements, have come into effect. 

They include greater detail about the types of information finance providers need to collect from borrowers before approving loans or providing further credit under existing policies.

For consumers, this change means more details will be gathered by lenders about reasons why they need loans, their incomes and expenses. 

This information will enable finance providers to properly assess whether loans will meet borrowers’ needs and that they can afford repayments without getting into financial difficulty.

Commission chair Anna Rawlings says the legislative changes are intended to better protect borrowers from taking on unaffordable debts and provide greater clarity for lenders when assessing loan applications.

“Lenders are obliged to help their customers make informed choices when they are taking out loans,” she explains.

“These changes to the responsible-lending requirements should help to deliver greater consistency in the provision of suitable and affordable loans to borrowers throughout the sector.”

A range of other changes also came into force on December 1. Directors and senior managers are required to exercise due diligence to ensure lenders comply with their obligations. 

There needs to be greater clarity about advertising standards for consumer loans and three new types of disclosure requirements have been introduced. 

Lenders must keep records demonstrating that their fees are reasonable and regularly review their fees. Such businesses may face financial penalties if they fail to comply with their obligations.

Most of the changes to the Credit Contracts and Consumer Finance Act and associated regulations apply to lenders providing consumer credit and mobile traders selling goods on credit.

“The commission’s priority in recent months has been to educate lenders about recent changes to consumer credit laws so they understand what is required of them and take steps to comply with their additional obligations,” says Rawlings, pictured.

More details about the changes to the credit laws and guidance resources can be found on the commission’s website.  

For more information about all the changes and timeline, visit MBIE’s website.