General policy statement
The Consumer Guarantees Act 1993 (the Act) is intended to provide protection for consumers against traders. The Act currently gives consumers broad recourse to both traders and lenders (creditors) equally. This is appropriate when the trader and lender are effectively the same, that is, when they are related parties in terms of NZ IAS 24: the accounting standard concerning related parties.
However, when the trader and lender are separate and at arms length from each other (unrelated parties), recourse should be to the trader who made the sale and not the lender, because the lender has little or no influence on the sale and so should have no direct responsibilities under the Act.
This anomaly has been highlighted by The New Zealand Initiative and arises because the current definition of supplier also applies the Act to the lender.
The purpose of this bill is to amend the definition of supplier in the Act to exclude a lender who is an unrelated party from the definition of a supplier.