One of the most significant changes introduced by the Credit Contracts and Consumer Finance Amendment Act 2014 (which was enacted in June) is the new “lender responsibility principles” and provision for the development of a Responsible Lending Code, which will elaborate on the lender responsibility principles.
When the new “lender responsibility principles” come into force, lenders under consumer credit contracts will be required to comply with certain conduct obligations, including:
- helping a borrower reach an informed decision about whether to agree to a loan;
- making reasonable enquiries to ensure the borrower can make repayments without suffering substantial hardship;
- treating borrowers and their property reasonably, with respect and in an ethical manner;
- ensuring the terms of the agreement and the exercise of powers by the lender are not oppressive; and
- meeting all legal obligations to the borrower.
Last month the Ministry of Business, Innovation and Employment issued a discussion document, inviting comments on how the Responsible Lending Code should be drafted. In developing the Code, the Ministry has indicated that it will have regard to the Lending Code in the United Kingdom and the guidance provided in Australia.
The Ministry has indicated that it intends to issue the Code by March 2015 to give lenders time to adapt their processes as necessary to comply with the principles. Prior to that, the Ministry will publish a draft Code for public comment in late 2014. The final Code will be prepared taking into account the comments received on the draft Code.
See our earlier client update here for further details.