What lenders must do

Key rules for lenders

Lenders must act in line with responsible lending principles set out in the Credit Contracts and Consumer Finance Act (CCCFA). It applies to those who provide mortgages, loans, agreed overdrafts, Buy Now Pay Later accounts and buying on credit, including truck shops. It also covers consumer leases and home buy-backs.

Responsible lending covers everything lenders do, from adverts to loan agreements, affordability assessments to limits on interest and fees. 

The most important requirements say lenders must:

• comply with disclosure obligations
• ask what the loan is for to make sure they provide the right type of finance.
• conduct an affordability and suitability assessment to check the loan or credit meets your needs and make sure you can afford repayments
• help you understand what you are signing up to before you sign
• limit interest and fees for high-cost loans (loans with 50% interest per annum or more)
• charge reasonable credit and default fees
• treat you fairly — this includes how the lender behaves when you can't pay. 

If a lender breaks these rules, apply to your lender to have your contract changed or cancelled. If they don't agree, complain to their dispute resolution scheme.

Lender responsibility principles 

What you can expect from your lender(external link) — Commerce Commission

Lenders who provide credit must also:

• be registered — check the Financial Service Providers Register
• be certified by the Commerce Commission, licenced or authorised by the Financial Market Authority or Reserve Bank of New Zealand (if not exempted
• belong to an approved independent dispute resolution scheme.

Unregistered lenders cannot make you pay interest, default fees and other costs of borrowing. They must register to gain this right, but can only make you pay borrowing costs for the time they are registered.

Financial Service Providers Register(external link)  — Companies Office

Responsible Lending Code – current

The code guides lenders on how to put lender responsibility principles into practice. It's a complex document aimed at businesses that provide loans and credit.

You can find the summarised principles, and how they apply to you as a consumer, on this page without reading the code in full.

Find the full Responsible Lending Code, or previous versions and addendums on the MBIE Document Library: 

Responsible Lending Code(external link) — MBIE website

Updated Responsible Lending Code – from 31 July 2024

The removal of affordability regulations and updating of the code took effect on 31 July 2024.

The changes are designed to give lenders more flexibility in how they assess consumer loan affordability, while ensuring they maintain responsible lending practices.

Lender responsibility principles

Lender responsibility principles protect your rights when you:

• borrow money or buy on credit
• act as a guarantor for someone's loan or credit contract
• buy credit-related insurance. For example, payment protection or mechanical breakdown insurance added to car finance.

If your lender has not followed the principles explained below, complain first to the lender. If you can't agree a solution, complain to the lender's dispute resolution scheme.

Check the loan meets your needs

The lender needs to check the loan is suitable for you and likely to be affordable. They could ask different questions to figure out what might suit you best, including:

•    how much you need to borrow
•    what the loan is for
•    if you need extra products like insurance
•    how you want to make repayments.

For example, if you want to make lump repayments alongside your regular repayments, a flexible or floating loan would meet your needs better than a fixed loan.

Make sure you can afford repayments

The lender must be satisfied it is likely that you will be able to make the repayments required without suffering substantial hardship.

They have to make reasonable inquiries that are sufficient to satisfy them of this. This could include asking for evidence of your income and asking about your expenses.

There is guidance in Chapter 5 of the Responsible Lending Code on how lenders are expected to do this.

Applying for a loan checklist [PDF, 422 KB] [PDF, 422 KB]
Applying for a loan checklist — Māori [PDF, 374 KB] [PDF, 374 KB]
Applying for a loan checklist — Sāmoan [PDF, 367 KB] [PDF, 367 KB]
Applying for a loan checklist — Tongan [PDF, 369 KB] [PDF, 369 KB]

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

Share key information and help you make informed decisions

This covers advertising, loan documents and other ways of sharing information. All information must be clear and understandable.

Lenders must give you specific information in writing (also called disclosure) before you take out the loan, and during the loan or credit contract.

You must be given copies of all important documents. For example, disclosure statement, payment schedule.

Before you sign or agree

Lenders must give you information about your rights, costs and rules to follow. This is usually in a document called a disclosure statement.

Examples of key information you must be given.

•    Total amount to repay, including interest.
•    All fees. For example, monthly admin fee or repossession costs.
•    Any assets used as loan security. For example, your car.
•    How to apply for hardship. 
•    How to cancel.

Credit contracts are supposed to be clear and understandable, but they can still include complex legal language. It's your right to get independent help if you don't understand something in your contract. Our page with simplified definitions can also help.

Credit contracts: Plain English definitions

If your disclosure statement has incorrect or missing information, or if you haven't been given one, the lender:

•    can't make you pay fees or interest for that time
•    can't enforce any other rules in your contract (including making you pay) until you have a disclosure statement with full and correct details
•    may face penalties if you complain to a dispute resolution scheme or take legal action.

During the loan or credit contract

Lenders must give updates on repayment progress and other account information, and they must do this at least every six months.

Some lenders send paper statements, others provide a secure website where you can log into your account.

If you and your lender agree to any changes mid-loan, for example reduced payments or higher fees, it must be put in writing before the change takes place.

Treating you reasonably and ethically when things go wrong

Lenders must always treat you fairly, including when there's a problem. A problem could include:

•    overdue payments
•    breaking a rule of your loan agreement. For example, selling a car used as loan security
•    an unexpected life event makes it hard to afford repayments (also called hardship)
•    repossession.

When it comes to repossession, lenders must:

•    only enter your home or garage when they have the right to do so
•    only take items listed as security in your contract. For example, car or TV
•    not take personal or household necessities. For example, beds, fridge or passport
•    not damage your home or belongings, including when storing repossessed items.

Once your item is sold, it freezes your account, meaning interest and fees will no longer be added to what you owe.

Repossession agents must also give you copies of important documents, including their licence or certificate. 

Repossession

Not use oppression (unfair behaviour or unfair contracts)

Your lender's behaviour, and the rules in your credit contract must be fair and in line with reasonable commercial practice. Check what other lenders do. Is your lender's behaviour within this range, or do they seem to have too much power over you?

If your lender or loan agreement seems to be extremely unfair, it might be considered oppressive behaviour or an oppressive contract. Both are illegal. 

Get independent advice on your next steps, which could include legal action.

Possible examples of oppression

•    Pressuring you to borrow more than you can afford.
•    Pressuring you to sign a contract on the spot, with no time to think or get advice.
•    Setting up a power imbalance so you are in a weaker position, including taking advantage of any barriers you face.
•    Charging high fees to earn a profit, not just to cover costs.
•    Giving too little time to pay any missed payments.
•    Taking too long to act on overdue payments, as it's unfair to let fees and interest stack up.
•    Failing to correct errors in how much is owed, especially if the lender continues to chase you for payment.

Unfair contract terms — Commerce Commission(external link)

Act in line with all other legal requirements

You have rights as a consumer under the Fair Trading Act and the Consumer Guarantees Act.

•     Lenders must not mislead you or lie to you, including in adverts or in contract terms (rules of the document you signed).
•     Lenders must not provide sub-standard services.

Financial dispute resolution schemes

All banks, lenders and financial advisers must belong to a financial dispute resolution scheme. This independent body can:

• give information about how lenders should act
• share tips on how to complain to your lender
• look into certain complaints when you and your lender cannot agree on a solution.

It's free for you talk to them and make a complaint. Or a free financial mentor can do this for you. Start by contacting the MoneyTalks helpline.

Free confidential advice(external link) — MoneyTalks

There are four schemes:

• Banking Ombudsman(external link)  — phone 0800 805 950
• Insurance and Financial Services Ombudsman(external link)  — phone 0800 888 202
• Financial Services Complaints(external link)  — phone 0800 347 257
• Financial Dispute Resolution Service(external link) — phone 0508 337 337

To find out which your lender belongs to, ask your lender or check:

• lender's website
• your credit contract, in a section called "dispute resolution"
• lender's entry on the Financial Service Providers Register.

Search the register(external link) — Financial Service Providers Register

You can also phone any of the financial disputes schemes — they will tell you which one to contact.

Possible outcomes

If the dispute scheme investigates your complaint, it might decide the lender should:

• Change your contract: A common option is to agree a new payment plan that you can afford.
• Reduce how much you owe: Some fees or interest might be refunded.
• Lower the interest rate.

It's up to you — not your lender — to accept or reject the scheme's decision. If you don't accept it, you can take your complaint elsewhere, eg District Court.

If things go wrong

If you think your lender or debt collector has acted unfairly, follow these steps — you might not need to do all three.

The Credit Contracts and Consumer Finance Act changed in June 2015. If your loan agreement started before then, different rules might apply.

1. Contact the lender

If a lender or debt collector seems to have acted unfairly, you can apply to have your contract changed or cancelled.

Before you make contact, read our information on how to complain.

A free financial mentor can help, or can talk to them for you. Start by contacting the free helpline MoneyTalks.

Contact information(external link) — MoneyTalks

How to complain 

•    Check your credit contract. This should list all fees and explain when you might have to pay these costs.
•    Gather proof. For example, if the fee amount is more than what's listed in your contract or on their website.
•    Think about what you will say, making notes with points you want to cover.
•    Decide your ideal outcome. For example, reducing or cancelling the fee.

During the conversation:

•    take notes including dates and what was said. If you need to take your complaint to the dispute resolution scheme, this will provide helpful proof.
•    stick to the facts — explain the problem and share any proof.
•    say what you want — explain your ideal outcome.
•    take time out — if it gets heated, or you want to think about their response, arrange a time to call or email back. Explain you need time to digest the conversation.
•    make it official — if you reach an agreement to reduce or waive (cancel) a fee, get it in writing. It's a good idea to get your contract updated.

2. Contact lender's dispute resolution scheme

All banks, lenders and financial advisors must belong to a financial dispute resolution scheme.

To find out which your lender belongs to, phone any one of the four schemes to find out. For contact details, see:

Financial dispute resolution schemes

3. Report the lender

The Commerce Commission enforces certain consumer laws, including the Credit Contracts and Consumer Finance Act. This is designed to make sure businesses lend responsibly, eg to check loans are affordable and disclose all interest and fees.

Commerce Commission doesn't act on behalf of individuals and can't investigate every complaint. But their investigations do help make sure businesses comply with the law. Your information helps them assess which consumer issues cause greatest harm.

Make a complaint(external link) — Commerce Commission

More help

MoneyTalks

MoneyTalks are financial mentors who give free budgeting advice to individuals, family and whānau. They can put you in touch with a local budgeting service, help you understand your financial situation, organise your debt and help with issues you're having with lenders. 

Contact information(external link) — MoneyTalks

Community Law Centre

Community Law offer free one-on-one legal advice for people with limited finances and has 24 law centers throughout the country. You can find legal information and other resources on its website.

Our law centres(external link) — Community Law Centre