New rules for credit companies
Lenders are being reminded that many of them need to be certified by the Commerce Commission or risk facing penalties of up to $600,000 under new regulations that came into force at the start of the month.
Businesses providing consumer credit and mobile traders selling on credit must be certified, unless an exemption applies to them.
The main exemption is if a lender is licensed or registered by the Financial Markets Authority or Reserve Bank of New Zealand. There is also a new exemption that relates to securitisation or covered bond arrangements.
A new exemption relates to non-financial services businesses that provide credit on an interim basis. For these companies to rely on the exemption, a number of requirements must be met including that the lender they have an agreement with is themselves certified.
The commission says in order to give certification it needs to be satisfied directors and senior managers are “fit and proper” to perform their role, and that they are financially sound, honest, reputable, reliable and competent to do their job.
Lenders providing consumer credit and mobile traders selling on credit that were registered as a financial service provider (FSP) by October 1, 2021, do not need to be certified until they complete their next annual FSP confirmation.
For those not already registered as an FSP by that date, they will need to be certified by the commission and registered as an FSP before they can provide consumer credit or mobile trading services.
Anna Rawlings, commission chairwoman, says: “We are aware that some organisations provide consumer credit that might not see themselves as typical lenders.
“This is a good time for all organisations who might be providing consumer credit or relevant mobile trading services to check their obligations, including whether they need to be registered and certified.
“The consequences could be significant if they get it wrong. If you sell goods or services on deferred payment terms to individuals you should get advice about whether you need to comply.
“Businesses must take a proactive approach to certification and ask themselves, ‘could this apply to me?’”
The commission recommends all lenders and mobile traders consider applying for certification at least two months before they have to be certified, in order to continue trading until the process is complete.
Lending without being certified may result in penalties of up to $600,000 for a company or $200,000 for an individual.
For more details, read the certification guidance on the commission’s website.