Rules banks and other lenders must follow to make sure loans and credit are affordable and meet your needs.
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.
Making a complaint about your financial services provider
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.
Searching the 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.
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.
Example — Lender acting unfairly
Maggie misses one of her car loan payments. She can't afford the missed payment and late fee until she gets her wages next week. She tries to explain this to her finance company. But they threaten repossession unless she pays off the whole loan within two days. Maggie calls the MoneyTalks helpline and is paired with a free financial mentor.
The mentor talks to the lender on Maggie's behalf, pointing out this is an extreme reaction to a missed payment. It could be oppressive conduct, which is illegal. The lender backs down. Maggie makes the missed payment on her payday.
If things go wrong
If you think your lender or other financial service provider has 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.