Unfair fees

Banks and other lenders can charge fees. What's fair and when do common fees apply?

If a fee seems unfair or incorrect, question your lender but make sure you pay it before the due date. They may decide to give you a full or partial refund.

It's a bad idea to simply not pay the fee. Your debts will mount up. And non-payment can count against you if the problem goes to a dispute resolution scheme or court.

Take your complaint further if needed. The lender's dispute resolution scheme may order it to refund fees. You may also be awarded compensation or have your credit contract cancelled if it's extremely unfair.

Making a complaint about your financial service provider

If an unfair fee is in your loan agreement, contact your lender to have it changed. If they don't agree, complain to their dispute resolution scheme.

Credit contracts: Plain English definitions

Example — Unfair admin fee

Ashton takes out a $4,000 loan with a $120 monthly admin fee. Ashton soon falls behind on repayments. Keen to get his debts under control, Ashton talks to a free financial mentor. The mentor thinks the admin fee is too high, so calls the lender to challenge it. But the lender refuses to reduce it — it's in the contract and Ashton signed it.

The mentor then complains to the lender's dispute resolution scheme. It investigates and finds admin costs are closer to $40 a month. The lender is ordered to cut its fee and refund Ashton the difference on any admin fees he's already paid. Ashton also complains to the Commerce Commission as other customers probably face similar fees.

Common fees lenders can charge

It's fair for lenders to ask you pay the fees and other costs listed on this page, so long as:

it's an amount that covers costs but makes no profit
daily costs are no more than 0.8% of the unpaid loan balance in interest and fees
you are given clear and accurate information about fees and when they will be charged, eg in your credit contract
you are treated fairly by the lender and any of their agents, eg debt collector.

These rules are in the Credit Contracts and Consumer Finance Act (CCCFA).

Credit Contracts and Consumer Finance Act

Daily costs

The daily cost is the amount high-cost lenders charge each day for providing credit. It affects how fast your debt grows.

It’s a percentage of the loan’s unpaid balance, and includes:

credit fees
interest
charges for optional services
other fees passed on by your lender.

The CCCFA limits daily costs to no more than 0.8% of the unpaid balance in interest and fees per day when averaged across the loan term.

Lenders must also act promptly if you fall behind on payments — it's unfair to let even fair fees and interest build up over time.

To get an idea of a fair amount for a fee, check what other lenders charge. Is it within this range, or much higher?

What lenders must do

Fees a lender may charge(external link) — Commerce Commission

Establishment or set-up fee

When it's charged: At the start of a loan or credit contract. It covers the lender's admin costs in setting up a loan, eg affordability assessments and writing loan documents. For vehicle finance, both the car dealer and finance company may charge set-up fees. This is allowed, so long as you are not charged twice for the same work, eg finance company's fee covers work done by the dealer.

What you could be charged:

lender's set-up fee
if a broker is involved, the lender can pass on their fee to you but it must be at cost (without profit).

If a broker's fee seems too high, complain to your lender. If this doesn't work, complain to the lender's dispute resolution scheme. Also report the high fee to the Commerce Commission.

Overdraft fee

Dishonour / honour fee

Default interest

When it's charged: If you fail to keep repayments up to date, or if your bank balance falls below $0, or the agreed overdraft limit.

Depending on your lender and your payment history, you might have a short time to pay what you owe without being charged default interest.

What you could be charged:

default interest on the amount you fail to pay back or are overdrawn.

Default interest is higher than your usual interest rate. It might be calculated daily, so can stack up quickly.

Default fees

When these are charged: When you fail to pay what you owe. Some default fees are charged as soon as your payment is overdue. Others come later, usually if you take no steps to get payments up to date.

What you could be charged:

late payment (default) fees — these must be $30 or less for high-cost loans
fee if you get a demand notice (also called a warning notice), which warns any loan security may be repossessed
fee if a warrant to repossession is issued.

You may also be charged default interest.

Break fee / early repayment fee

When it's charged: You repay a loan in full before the final payment is due. Examples include paying off a car loan early, or switching to a new mortgage deal partway through a fixed-term deal.

What you could be charged:

admin fee
extra costs if your lender loses money because of market interest rate changes since your loan was set up.

These extra costs can be high, so make sure you get a quote from your lender before finalising the break or full repayment.

Lenders often use a complex equation set out in the Credit Contracts and Consumer Finance Act to calculate any losses. If they use a different method, it must still be a reasonable estimate of any losses. Details should be in your credit contract or loan agreement.

Fees others might charge

Debt collector fees

When these are charged: When a lender engages a person or agency that specialises in chasing unpaid debts. Some debt collectors act for the lender. Others buy your unpaid debt from the lender, meaning they take over as your creditor.

What you could be charged:

debt collection fees
any repossession fees if the debt collector is your new creditor.

You must be told at the start that debt collection fees may be charged, eg in a loan contract, store display or on the back of a ticket. Fees must be reasonable (cover costs only) if the debt collector is your new creditor.

For fee information if the debt collector is acting on behalf of your lender, see:

Debt collection fees

If your unpaid debts end up in court, only the court itself can decide if you or the lender/debt collector must pay legal costs.

Insolvency fees

When these are charged: You become insolvent. Your debts are frozen or written off, but there are extra costs you must pay to the Insolvency and Trustee Service.

What you could be charged:

application fee
admin costs while you are insolvent.

Amounts vary, depending on the type of insolvency, eg debt repayment plan (also known as a summary instalment order or SIO), no asset procedure or bankruptcy.

Bankruptcy and insolvency options

If things go wrong

If you think your lender or other financial service provider has overcharged you or acted unfairly in any way, then there are options you can take to address your issue. This can include making a formal complaint with your provider or getting help from a financial dispute resolution scheme.

Making a complaint about your financial service provider

Seek personal support

If you need help to understand your rights or communicate with your provider you can seek personal support.

MoneyTalks: This helpline gives free budgeting advice to individuals, family and whānau. Financial mentors can help you understand your financial situation, organise your debt and plan for the future. They can also put you in touch with a local budgeting service and help with issues you're having with lenders. Phone 0800 345 123, or use live chat, email or text, if you prefer.

Contact information(external link) — MoneyTalks

Citizens Advice Bureau (CAB): A free, independent service, run by volunteers. CAB can advise you on your consumer rights and obligations, in person, by phone, or online.

Citizens Advice Bureau(external link)

Community Law Centre: Free one-on-one legal advice to people with limited finances. The organisation has 24 community law centres throughout the country. You can find legal information and other resources on its website.

Our law centres(external link) — Community Law Centre

On this page

Example — Unfair admin fee

Common fees lenders can charge

Daily costs

Fees others might charge

If things go wrong

Seek personal support

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