Cabinet has recently released plans to amend consumer credit law. With the general election pending, no timeframe for implementing these changes has been indicated. Subject to the result of the election, we expect the Government to release draft legislation for consultation in 2012.
Key changes being considered are:
Strengthen the Credit Contracts and Consumer Finance Act 2003 (CCCFA) by adding new responsible lending requirements, including:
- that the borrower must be reasonably expected to repay the loan without substantial hardship
- that the lender must be honest and transparent in dealing with the borrower
- Create a "Code of Responsible Lending"
- Empower the Financial Markets Authority to issue formal warnings and cancel a person’s registration as a financial service provider if they fail to comply with the Code and other relevant legislation
- Provide that borrowers are not liable for the costs of interest or fees if their lender is not registered (as required) on the Financial Service Providers Register
- Amend the CCCFA to stipulate that advertising must not be misleading, deceptive, or confusing and must comply with the Code (and provide for prohibition of advertisements that breach this requirement)
- Protect important goods (e.g. tools of trade, necessary household items and motor vehicles valued at up to $5,000) from being used as security against a loan (except a loan for such items)
- Extend the "cooling-off period" (i.e. the period in which a consumer has the right to cancel a credit contract) from 3 to 5 working days
- Improve disclosure requirements.
See the full press release avaliable here. We will keep you updated with developments.