Credit Contracts and Consumer Finance Act 2003

Question 1

credit is

Answer 1

the ability of a customer to obtain goods or services before payment, based on the trust that payment will be made in the future.

Question 2

credit contracts

Answer 2

is a contract where a borrower is given credit for personal use, such as through a mortgage, credit card, arranged overdraft, personal or cash loan, or pawnbroking pledge.

Not student loan

Question 3

Credit Contracts and Consumer Finance Act 2003

Answer 3

CCCF Act

covers a range of transactions where money is loaned for personal use, including consumer credit contracts, consumer leases and buy-back transactions.

Very prescriptive.

protects consumers when they’re borrowing money. Ensures consumers can make informed choices, know what they’re agreeing to, and can keep track of their debts. Promote and facilitate fair, efficient and transparent markets for credit and protect interests of consumers under credit contracts, etc. Provide remedies, etc.

Covers a range of transactions where money is loaned for personal use, including consumer credit contracts, consumer leases, and buy-back transactions.

Question 4

CCCF Act basics

Answer 4

Lenders

• must disclose key info about contract and clear and accurate
• can’t impose oppressive requirements on borrowers
• can’t enforce contracts in an oppressive way
• must disclose any fees and make sure they are reasonable

Borrowers

• can cancel contract after receiving disclosure
• have right to repay what they owe on contract early
• can ask lenders to change contract if suffering unexpected hardship

Question 5

why this matters

Answer 5

world revolves on credit.

Cost of borrowing includes so much —- credit, interest, etc

Question 6

where credit is used

Answer 6

shops, banks, buying cars

Question 7

Model disclosure statements

Answer 7

Should disclose to potential customers.

Need to disclose everything pretty much.

Try for consistency, correct answers (certainty). Ensure they accept it. Documentation needs to be good.

Try to protect people as it enables people to take advantage of others.

Question 8

content overview of CCCF Act

Answer 8

can include

• interest charges
• payments
• fees
• types of fees (credit, default and third party fees)
• consumer rights - cancellation and hardship
• variation of credit contracts
• oppressive contracts - protections for borrowers

If you breach as lender, Commerce Commission’s role.

Other concepts defined

• credit, credit contract, buy-back transaction
• lender responsibilities
• consumer credit contracts
• disclosures
• disclosures standards
• requirement of writing
• debtor’s right to cancel
• types of charges, fees, etc

Question 9

Key legislation

Answer 9

CCCF Act 2003
Amendments
- Part 1 - lender responsibilities and responsible lending code
- Part 2 - provisions relating to consumer credit contracts
- Part 3 - consumer leases, insurance, waivers for repayment, extended warranties and buy-back transactions of land
- Part 3A- repossession of consumer goods under credit contract,
- Part 4 - civil remedies, injunctions, offences, a defence
- Part 5 - reopening of oppressive credit contracts, etc
- Part 6 - miscellaneous provisions - contracting out, etc

Question 10

administration and enforcement

Answer 10

Administer by MBIE.

Operation overseen by CC.

Question 11

exclusions

Answer 11

a contract is not a consumer credit contract where it is a

• credit sale and has to pay within two months
• soemone has overdrawn bank account without having an agreed overdraft facility on account
• borrower acting as trustee for family trust

Can still be re-opened by Courts if oppressive (still credit contracts just not consumer)

Question 12

buy back transactions

Answer 12

a person agrees to transfer an estate to another person. The person has the right to buy land back. Usually, pays debt ,etc.

Question 13

Consumer lease

Answer 13

lease contract where someone is leasing goods for personal use and either has an option to purchase the leased goods, or the term of lease is over one year.

Question 14

credit fee

Answer 14

an additional charge a lender may add to amount loaned under credit contract

Question 15

interest

Answer 15

am amount a lender changes a borrower for use of money

Question 16

security interest

Answer 16

an interest in goods or property that lets lenders secure repayment of contract by selling goods or property and using proceeds to repay loan

Question 17

what rules apply to CCC under CCCF act

Answer 17

• disclosure - give key info
• types of disclosures - see standards and statements
• interest charges - how they can charge but there is no cap on charge
• payments - must apply repayments according to rules set out in Act and tell if they will accept extra part repayments. Can repay earlier.
• fees - rules about fees that can charge. must be reasonable.

Question 18

breach by lender

Answer 18

• unable to enforce contract or recover property or security interest (prohibited enforcement)
• have to pay borrower a set penalty (statutory damages)
• ordered to pay compensation or refund money to borrower (general remedial orders)
• have contracts changed by Court if contracts are oppressive (reopening orders)
• be stopped by Court from behaving in a particular way (injunctions)
• be banned by Court from operating within finance industry (banning orders)

Question 19

Sportzone Motorcycles Ltd and Motor Trade Finances v CC (2013 and 2014)

Answer 19

Importance of CCFA.
Role of CCFA - protect consumer borrowers.

Protect those who may be vulnerable (such as those who are less financially literate).

Advance transparency and disclosure.

If fee unreasonable, cannot be imposed.

Appeal to Supreme Court.