There’s a good chance that you haven’t heard of the Credit Contracts and Consumer Finance Act (CCCFA), but it’s an important one!  It’s the Act that protects you when you borrow money or buy products or services on credit. So, if you are using a credit card, getting a personal loan, using a store card or have resorted to a payday loan then this is an important read.

The Act requires lenders to always act responsibly and to ensure that you, the borrower, are making informed choices and know what you are agreeing to.  There are certain things lenders must tell you when you borrow money. This is called disclosure of information.

For example, lenders must:

  • make standard terms and costs of borrowing publicly available via their website or on clearly displayed notices at their premises. This helps borrowers compare the cost of borrowing and contract terms, and to shop around.
  • give you important information in writing before you sign an agreement, eg annual interest rate, all fees, how you can cancel, details of their dispute resolution scheme.

More here

Most lenders are responsible and provide the information about the loan etc, and meet these obligations already, but knowing how much your credit is costing you does not stop the lenders from charging fees and interest rates that make it almost impossible for you to repay the loan!!  For this reason, the Act has been reviewed and changed. 

Some amendments to the Act will come into force from 1st October 2021. You can read about the changes to the Act in more detail here.

Lenders will be working under new prescriptive requirements when assessing the affordability and suitability of loans. Additional registration and compliance will be required to be undertaken by lenders, and the responsible advertising standards also have new regulations.

One recent change to the Act means that lenders can no longer charge a total of more than twice the amount of the original loan (also called the principal).

For example, if you take out a loan of $150 to cover an unexpected bill, the lender can’t charge you more than $300. Previously a $150 loan could end up costing you hundreds more than that if you were charged high interest rates, late payment fees, etc. – borrowers could be paying back a lot more than twice the principal.

That is still a large amount of extra money to be paying off your loan, so it is important that you go into a situation with your eyes open – look out for the ways in which you will incur extra charges. These could be late payment fees, or ironically also early repayment fees!

 

Finance is More Than…

Finance is More Than…

Finance is more than debt management, savings and investments.  Insurance and estate planning are also key aspects of your financial security - having a will and power of attorney for your property and wealth, as well as insurance for your things and more importantly...

RBNZ Announcement

RBNZ Announcement

The RBNZ today announced that debt serviceability restrictions are being added to the policy toolkit. The RBNZ and the Minister of Finance have agreed to update their shared Memorandum of Understanding on “macroprudential policy”. This is basically the policy that...

Long Term Interest Rates are on the Rise

Long Term Interest Rates are on the Rise

Long term interest rates are on the rise, so it’s a good time to think about fixing for 5 years while the rates are still good – but only if this actually works for your situation! The main banks had been offering 5 years fixed at 2.99%, but as of February this year...

Debt, and How to Deal with it.

Debt, and How to Deal with it.

Having debt can be really stressful!  The thing is, it happens. Getting on top of it takes a bit of planning. Sometimes we can find ourselves in a situation where we have multiple debts – a few thousand on a credit card, finance for the car you bought a couple of...

Newsletter June 2021

Newsletter June 2021

  Hi there!   May has passed quickly and today is the first official day of winter – can you believe that we are now almost halfway through the year? Here in Canterbury the weather has really let us know that winter is on its way.  Evacuations, flooded...

New Default KiwiSaver Providers Announced

New Default KiwiSaver Providers Announced

We have known for a while that there are some changes coming for KiwiSaver. The reason for the changes is to take better care of the over 400,000 people that are still in default KiwiSaver Schemes. The major change is that all members in default schemes will be moved...

Credit Cards and the Cost of Debt

Credit Cards and the Cost of Debt

We’ve written about Credit Cards before (that blog post here), the good and the bad aspects. Now we’re going to delve a bit deeper into how credit card debt works. What is the cost of your credit card debt if you only pay the minimum repayments? Spoiler: it’s a lot. A...

Newsletter May 2021

Newsletter May 2021

Hi there! Here we are 1/3 of the way through the year already and instead of settling down into old familiar rhythms, our clients and the team at Building on Basics are finding that the pace seems to be steadily increasing.  The property market continues to operate at...

A closer look at Otautahi Christchurch

A closer look at Otautahi Christchurch

Let’s look at some local property figures. Canterbury is still one of the more affordable places to live in New Zealand, but that doesn’t mean it’s a slow or easy market! As many of our clients are in this region, we are very aware of how challenging the market is at...

NZ’s Building Industry is at Capacity

NZ’s Building Industry is at Capacity

We all know that there are more buyers than sellers in the housing market at the moment. Build more houses – problem solved! Well, maybe not. New Zealand’s Building and Construction industries are at capacity, with many builders and industry specialists fully booked...