Consumer Credit Protection – Reforms Pushed Through Early

The Government has passed urgent legislation to amend some of the commencement dates of the Credit Contracts Legislation Amendment Act (CCLAA) land is now in force (from 1 May 2020).

The economic disruption caused by COVID-19 has led to significant financial uncertainty for many consumers, many of whom will face uncertain job prospects in the coming months.

The Minister for Commerce and Consumer Affairs urges anyone facing financial difficulties to explore other options before taking on any new loans. They can talk with their lender about alternative repayment arrangements, contact Work and Income for financial assistance, get in touch with Good Shepherd about a no-interest loan, or call the MoneyTalks helpline.

To better protect consumers who do take out new loans under high-cost credit contracts during this time, the Government has decided to bring forward the commencement date of some protections relating to high-cost loans.

The measures that will come in early are:

·       the cost of credit cap, so that people will never have to pay back more than 100 per cent of the loan principal (section 45E)

·       banning compound interest on high-cost loans (section 45I) and

·       limiting default fees to $30 (section 45J).

The provisions that will now be coming into force on or around 1 May will be supported by sections 34(1), 37, 40(1) which provide new Commerce Commission powers relating to compliance orders and corrective advertising, and regulation 6A which defines how the weighted annual interest of a consumer credit contract is to be calculated.

Please note that the commencement date of the other provisions relating to high cost lending will  still commence on 1 June as previously planned. These are:

·       the 0.8% per day interest rate cap (section 45H) and

·       regulation of mobile traders (section 16A).

In addition, some technical provisions that were due to come into force via Order in Council will now come into force on 1 June 2020. These are section 6 (interpretation), section 8 (statutory damages) and sections 55(2), 56, 57 and 58 relating to layby sales agreements).

[Source: MBIE. Click here for more information. ]