Source: Consumer Affairs – New Zealand Government
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%.
Lenders cannot ask you to pay back more than twice the amount borrowed in a high-cost loan entered into after 1 May 2020 (amount borrowed is also called the principle). 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.
- 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.
From 1 June 2020, truck shops and other mobile traders will be covered by the CCCFA. Like other lenders, they must follow responsible lending rules, including:
- Check if the amount borrowed meets your needs.
- Make sure you can afford repayments.
- Limit interest and fees.
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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