Review of Section 99(1A) of the Credit Contracts and Consumer Finance Act 2003
The Credit Contracts and Consumer Finance Act 2003 covers, amongst other things, a range of transactions where lenders give credit to private individuals for personal use, such as through a mortgage, credit card, arranged overdraft or cash loan.
The lender (or 'creditor') must disclose key information to the debtor pursuant to sections 17 and 22 of the Act, including 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, however, section 99(1A) provides that “neither the debtor nor any other person is liable for the costs of borrowing in relation to any period during which the creditor has failed to comply with section 17 or 22”. Under this provision, the creditor will forfeit the right to any interest or charges for the period during which non-compliant disclosure was made.
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.
Consultation opened on 2 November 2016 and closed on 9 December 2016.
Ministry officials will consider submissions and then advise the Minister of Commerce and Consumer Affairs on whether reform of section 99(1A) is appropriate.
This discussion paper is designed to test different options for the amendment of section 99(1A). Responses will be used to determine which of the different options is most appropriate, should a decision be made by the government to amend the provision.