Review of Section 99(1A) of the Credit Contracts and Consumer Finance Act 2003
Cabinet has decided to amend section 99(1A) of the Credit Contracts and Consumer Finance Act (CCCFA)
On June 2018, Cabinet decided to confirm the previous government’s decisions regarding the amendment of section 99(1A). These decisions were that:
- section 99(1A) of the Act be amended, so that in future a lender has the right to apply to a court for relief from the presumption of 100 percent forfeiture of all interest and fees
- where a lender breaches section 99(1A) of the Act in the period before its amendment:
- the lender should not have the right to apply for relief from the courts, in respect of any interest and fees it must forfeit for the period between the breach and the entry into force of the amended section 99(1A) of the Act, but
- the lender should have the right to apply for relief from the courts, in respect of any interest and fees it must forfeit for the period between the entry into force of the amendment and the date the breach is discovered and remedied.
These changes will be included in a Credit Contracts and Consumer Finance Amendment Bill, which is expected to result from the current review of consumer credit regulation and contain a range of changes to the CCCFA. The Minister has said that he expects to introduce this Bill at the end of this year, or early next year.
You can read background information about this decision in these documents:
- Cabinet paper, May 2017: Credit Contracts and Consumer Finance Act 2003: consequences of non-compliant information disclosure [PDF 466KB ]
- EGI Minute of Decision, May 2017 [PDF 117KB]
- Cabinet paper, June 2018: Approval to release discussion paper “Review of Consumer Credit Regulation”, and amend section 99(1A) of the Credit Contracts and Consumer Finance Act 2003” [PDF 495KB]
- Cabinet Economic Development Committee Minute of Decision, June 2018 [PDF 139KB]
- Regulatory Impact Statement, May 2017: Consequences for lenders of non-compliant information disclosure: section 99(1A) of the Credit Contracts and Consumer Finance Act 2003 [PDF 635KB]
Under sections 17 and 22 of the CCCFA, lenders (or 'creditors') must disclose key information to the debtor. This includes the annual interest rate, any fees that apply, and the details of the relevant dispute resolution service.
A number of legal consequences result from a failure by a creditor to make proper disclosure of this information to debtors. These include a right for the consumer to cancel the loan (section 27) and a pecuniary penalty for the lender (section 102A).
In addition, section 99(1A) provides that the creditor will forfeit the right to any interest or charges for the period during which non-compliant disclosure was made.
Consultation on section 99(1A) of the Credit Contracts and Consumer Finance Act 2003
In a press release dated 2 November 2016, the Minister of Commerce and Consumer Affairs noted that he is concerned that this rule “might lead to unfair outcomes, particularly where the information the lender fails to disclose is very minor or where the borrower suffers no harm”. The Minister asked MBIE to release a discussion paper to test this concern with the public.
A discussion paper was released to test different options for the amendment of section 99(1A). Consultation opened on 2 November 2016 and closed on 9 December 2016.