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PERSONAL LOAN AGREEMENT

Your Rights

In New Zealand when you enter into a personal loan agreement, you are protected by Consumer Credit laws, which are designed to:

- ensure you get treated well
- make the personal loan agreement fair and reasonable
- keep you informed of what you are getting
- give you somewhere to go if things don't go right

THE REALITY

At the end of the day, the reality is that the CCCF Act can only protect individuals to a certain extent.

If you don't know the rules when entering into a personal loan agreement, then you will not know if the rules are not being followed.

YOUR BEST PROTECTION?

KNOWLEDGE!

- Inform yourself.
- Ask questions.
- Take time to read and understand any information you are given.
- Take someone with you who will help you understand.



CREDIT CONTRACTS AND CONSUMER FINANCE

CCCF Act 2003

The CCCF Act 2003 commenced on 1 April 2005.

The CCCF Act applies to loan contracts for personal finance(among other things) entered into after 1 April 2005.

A personal loan is also called a Consumer Credit Contract.

Also covered by this Act are hire-purchase agreements, residential home mortgages and personal credit cards.

This information is very general, and it may be helpful for you to seek further advice if you are unsure of your rights.

RULES OF THE CCCF

DISCLOSURE

When you enter into a contract you will be given specific information

- to help you undertand what it will cost you

- to help you decide if that is what you want to do

Most lenders will have standard forms which meet the Act’s disclosure standards and comply with the law.

INTEREST

Interest rates and the method for calculating the interest charges must be fully and clearly disclosed at the beginning of the contract.

Interest must not be charged in advance.

The maximum interest that can be charged is determined by applying the daily interest rate to the daily unpaid balance.

Default interest can be charged if the debtor does not make an agreed payment. Default interest can only be charged while the default continues.

FEES

All fees charged must be disclosed in full at the outset of the contract, and must be reasonable.

Establishment fees must be no more than what it cost a creditor to set up the consumer credit contract. Lenders cannot “mark up” or charge a premium on any fees charged by a third party. You can only be charged the actual amount they were charged.

PAYMENTS

There are rules about the way in which payments are made.

The lender must add a payment as soon as possible, unless the contract requires a particular payment plan to be followed.

The lender must accept any extra or early part prepayment unless the contract specifically states that the creditor has the right to decline it.

FULL REPAYMENT

Debtors have a right to fully repay a loan.

However, the lender may charge a fee if a debtor repays a contract early and the creditor suffers a loss.

This fee must be reasonable.

INSURANCE ETC

The lender must not unreasonably require the debtor to get related insurance, repayment waivers or extended warranties.

For example, a lender cannot require a debtor to purchase:

Income-protection insurance, if the debtor is unemployed

Insurance for goods sold on credit, if the debtor already has home and contents insurance that would cover the goods

A warranty that is the same as the manufacturer’s warranty

Lenders must also disclose to debtors the terms of any related insurance.

CANCELLATION

Debtors have the right to cancel a contract up to three days after disclosure has been made.

If the debtor has purchased goods on hire purchase or similar, the debtor may cancel the loan part of the transaction but must pay the cash price of the goods in full.

OPPRESSIVE CONTRACTS

A contract can not be oppressive.

It must not be harsh, unjustly burdensome, in breach of reaonable standards of commercial practice or unconscionable.

The lender must not act oppressively.

The debtor must not have been introduced to the contract by an oppressive means.

The courts have powers to re-open a contract that is found to be oppressive.

DAMAGES AND REMEDIAL ORDERS

The Court has wide powers where the lender has breached the Act.

These orders are designed to compensate the debtor for any loss suffered and can include orders for refunding payments, compensation and exemplary damages.

The Court can make orders not only against the lender but also against other persons involved in the breach.

The CCCF Act makes it a criminal offence to breach its provisions.

This information is very general, and it may be helpful for you to seek further advice if you are unsure of your rights when looking for finance.



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