Credit Contracts and Consumer Finance Regulations 2004

Reprint
as at 1 April 2005

Crest

Credit Contracts and Consumer Finance Regulations 2004

(SR 2004/240)

Silvia Cartwright, Governor-General

Order in Council

At Wellington this 9th day of August 2004

Present:
Her Excellency the Governor-General in Council

Note

Changes authorised by section 17C of the Acts and Regulations Publication Act 1989 have been made in this reprint.

A general outline of these changes is set out in the notes at the end of this reprint, together with other explanatory material about this reprint.

These regulations are administered by the Ministry of Consumer Affairs.

Pursuant to section 138 of the Credit Contracts and Consumer Finance Act 2003, Her Excellency the Governor-General, acting on the advice and with the consent of the Executive Council, makes the following regulations.

Regulations

1 Title

  • These regulations are the Credit Contracts and Consumer Finance Regulations 2004.

2 Commencement

  • These regulations come into force on 1 April 2005.

3 Interpretation

  • (1) In these regulations, unless the context otherwise requires,—

    fixed interest period means a period of a fixed rate contract for which a fixed interest rate applies

    fixed interest rate means the rate of interest that is fixed for the term or any part of the term

    fixed rate contract means a consumer credit contract that has a fixed interest rate

    term, in relation to a fixed rate contract, means the period between the first advance made under the contract and the last payment anticipated by the contract.

    (2) In these regulations, unless the context otherwise requires, variables contained in formulae are calculated as at the date of full prepayment.

4 Status of examples

  • (1) Every example used in these regulations is part of these regulations.

    (2) An example used in these regulations is only illustrative of the provision to which it relates. It does not limit the provision.

    (3) If an example and the provision to which it relates are inconsistent, the provision prevails.

Alternative publication requirements

5 Alternative publication requirements

  • For the purposes of sections 23(4) and 26(4) of the Act, a creditor may make disclosure in relation to a change to the amount of an interest rate, or to the amount of any fee or charge payable, by—

    • (a) displaying the information at all of the creditor's places of business that are accessed by the public so that the information is reasonably visible (at all reasonable times) to persons entering those places of business; and

    • (b) advertising the information at least once in the daily newspapers published in all of the following areas in which the creditor carries on business: Whangarei, Auckland, Hamilton, Rotorua, Hawkes Bay, New Plymouth, Palmerston North, Wellington, Nelson, Christchurch, Dunedin, and Invercargill; and

    • (c) if the creditor has a website, posting the information on the creditor's website in a form that is publicly accessible (at all reasonable times).

Assumptions

6 Assumptions

  • For the purposes of section 33 of the Act, the assumptions that may be used or applied when disclosing information that is required to be disclosed under the Act (and the terms and conditions of those assumptions) are set out in Schedule 1.

    Regulation 6: amended, on 1 April 2005, by regulation 3 of the Credit Contracts and Consumer Finance Amendment Regulations 2004 (SR 2004/359).

Rebate of premium paid under consumer credit insurance contract

7 Rebate of consumer credit insurance contract premium

  • For the purposes of section 52 of the Act, the proportionate rebate of the premium paid under a consumer credit insurance contract financed under the consumer credit contract must be determined in accordance with the following formula:

    .

    where—

    y
    is the amount of the rebate of the premium
    p
    is the amount of premium paid
    s
    is the number of whole months in the unexpired portion of the period for which insurance was agreed to be provided
    t
    is the number of whole months for which insurance was agreed to be provided.
    Example

    A consumer credit insurance contract is financed under a consumer credit contract. The period for which insurance was agreed to be provided under the consumer credit insurance contract is 36 months and a premium of $500 is paid. Full prepayment of the consumer credit contract is made 18 months and 24 days after the commencement of the period for which insurance was agreed to be provided. Applying the above formula, the amount of the rebate of the consumer credit insurance contract premium is calculated as follows:

    p=$500
    s=17 (36 months – 18 months and 24 days = 17 months and 6 days, which is 17 whole months)
    t=36
    .

    The amount of the rebate of the premium is $114.86.

Creditor's loss arising from full prepayment

8 Application of regulation 9

  • Regulation 9 applies to a fixed rate contract if—

    • (a) the contract has one fixed interest rate that is fixed for the whole term (whether or not the contract provides for default interest charges); and

    • (b) the contract requires payments of equal amounts to be made at equal intervals; and

    • (c) all the variables contained in the formula set out in regulation 9 can be determined with reasonable accuracy.

9 Calculation of reasonable estimate of creditor's loss if interest rate fixed for whole term

  • (1) For the purposes of section 54(1)(a) of the Act, a reasonable estimate of a creditor's loss arising from a full prepayment of a fixed rate contract may be determined in accordance with the following formula:

    LRE = VFP − u

    where—

    LRE
    is the reasonable estimate of the creditor's loss arising from the full prepayment
    VFP
    is the value of forgone payments calculated in accordance with subclause (2)
    u
    is the unpaid balance at the time of the full prepayment.

    (2) The value of forgone payments is calculated in accordance with the following formula:

    .

    where—

    VFP
    is the value of forgone payments
    p
    is the amount of each payment payable under the fixed rate contract
    v
    is calculated in accordance with subclause (3)
    n
    is the number of payments yet to be made under the fixed rate contract
    f
    is the number of payments to be made per year under the fixed rate contract
    i
    is the annual fixed interest rate determined in accordance with subclauses (4) and (5) and expressed as a decimal fraction
    d
    is the number of days between the payment due date that immediately precedes the date of full prepayment and the date of full prepayment.

    (3) The variable v is calculated in accordance with the following formula:

    .

    where—

    i
    is the annual fixed interest rate determined in accordance with subclauses (4) and (5) and expressed as a decimal fraction
    f
    is the number of payments to be made per year under the fixed rate contract.

    (4) The annual fixed interest rate i is the annual fixed interest rate that at the date of full prepayment of the fixed rate contract the creditor usually offers on a fixed rate contract that—

    • (a) is of the same or a similar type as the fixed rate contract that is to be fully prepaid; and

    • (b) has a term that is—

      • (i) equal to the unexpired portion of the term of the fixed rate contract that is to be fully prepaid; or

      • (ii) closest to the unexpired portion of the term of the fixed rate contract that is to be fully prepaid, whether shorter or longer (if the creditor does not offer a fixed rate contract with a term equal to the unexpired portion of the term of the fixed rate contract that is to be fully prepaid).

    (5) If more than 1 annual fixed interest rate applies under subclause (4)(b)(ii), the annual fixed interest rate i is the higher or highest of those annual fixed interest rates.

    (6) If a reasonable estimate of a creditor's loss arising from a full prepayment determined in accordance with the formula in subclause (1) is less than zero, then the reasonable estimate of that creditor's loss arising from the full prepayment is zero.

    Example

    A debtor is advanced $5,000 under a fixed rate contract. The contract is for a term of 2 years. The annual interest rate for the whole term is 12%. Each of the 24 monthly payments is $235.37. Full prepayment of the contract is made after 6 months and 5 days (5 days since the last payment due date) when the unpaid balance is $3,865.66. At the date of full prepayment, the annual interest rate that the creditor usually charges on a fixed rate contract of the same or a similar type as the fixed rate contract that is to be fully prepaid with a term of 12 months is 10% (a 12-month fixed rate contract having an interest rate of 10% being closest in term to the 18-month unexpired portion of the term of the fixed rate contract that is to be fully prepaid). Applying the above formula, a reasonable estimate of the creditor's loss arising from the full prepayment is calculated as follows:

    p=$235.37
    n=18
    f=12
    i=0.1
    d=5
    u=$3,865.66
    .
    LRE=$3,924.23 − $3,865.66 = $58.57

    A reasonable estimate of the creditor's loss is $58.57.

    If, however, in the above example the interest rate for fixed term contracts offered by the creditor for a term of 12 months was 15%, then variables v and VFP would be:

    .

    LRE would then be calculated as follows:

    LRE=$3,780.11 − $3,865.66 = − $85.55.

    A reasonable estimate of the creditor's loss in this case would be zero.

    Note: For the purpose of this example only, calculations have been rounded to 9 decimal places.

10 Application of regulation 11

  • Regulation 11 applies to a fixed rate contract if—

    • (a) the contract has a fixed interest period for part, but not the whole, of the term (whether or not the contract provides for default interest charges); and

    • (b) the contract is fully prepaid during that fixed interest period; and

    • (c) the contract requires payments of equal amounts to be made at equal intervals during that fixed interest period; and

    • (d) all the variables contained in the formula set out in regulation 11 can be determined with reasonable accuracy.

11 Calculation of reasonable estimate of creditor's loss if interest rate fixed for part of term

  • (1) For the purposes of section 54(1)(a) of the Act, a reasonable estimate of a creditor's loss arising from a full prepayment of a fixed rate contract may be determined in accordance with the following formula:

    LRE = VFP – u

    where—

    LRE
    is the reasonable estimate of the creditor's loss arising from the full prepayment
    VFP
    is the value of forgone payments calculated in accordance with subclause (2)
    u
    is the unpaid balance at the time of the full prepayment.

    (2) The value of forgone payments is calculated in accordance with the following formula:

    .

    where—

    VFP
    is the value of forgone payments
    p
    is the amount of each payment payable under the fixed rate contract during the fixed interest period in which the contract is fully prepaid
    v
    is calculated in accordance with subclause (3)
    n
    is the number of payments yet to be made under the fixed rate contract during the fixed interest period in which the contract is fully prepaid
    f
    is the number of payments to be made per year under the fixed rate contract during the fixed interest period in which the contract is fully prepaid
    i
    is the annual fixed interest rate determined in accordance with subclauses (4) and (5) and expressed as a decimal fraction
    d
    is the number of days between the payment due date that immediately precedes the date of full prepayment and the date of full prepayment
    EB
    is the expected unpaid balance at the end of the fixed interest period in which the fixed rate contract is fully prepaid calculated in accordance with subclause (6).

    (3) The variable v is calculated in accordance with the following formula:

    .

    where—

    i
    is the annual fixed interest rate determined in accordance with subclauses (4) and (5) and expressed as a decimal fraction
    f
    is the number of payments to be made per year under the fixed rate contract during the fixed interest period in which the contract is fully prepaid.

    (4) The annual fixed interest rate i is the annual fixed interest rate that at the date of full prepayment of the fixed rate contract the creditor usually offers on a fixed rate contract that—

    • (a) is of the same or a similar type as the fixed rate contract that is to be fully prepaid; and

    • (b) has a fixed interest period that is—

      • (i) equal to the unexpired portion of the fixed interest period of the fixed rate contract that is to be fully prepaid; or

      • (ii) closest to the unexpired portion of the fixed interest period of the fixed rate contract that is to be fully prepaid, whether shorter or longer (if the creditor does not offer a contract with a fixed interest period equal to the unexpired portion of the fixed interest period of the fixed rate contract that is to be fully prepaid).

    (5) If more than 1 annual fixed interest rate applies under subclause (4)(b)(ii), the annual fixed interest rate i is the higher or highest of those annual fixed interest rates.

    (6) The expected unpaid balance at the end of the fixed interest period is calculated in accordance with the following formula:

    EB = u + IC – TP

    where—

    EB
    is the expected unpaid balance at the end of the fixed interest period in which the fixed rate contract is fully prepaid
    u
    is the unpaid balance at the time of the full prepayment
    IC
    is the total amount of the interest charges that would have been paid in accordance with the contract during the unexpired portion of the fixed interest period in which the fixed rate contract is fully prepaid
    TP
    is the total of all payments that would have been paid in accordance with the contract during the unexpired portion of the fixed interest period in which the fixed rate contract is fully prepaid.

    (7) If a reasonable estimate of a creditor's loss arising from a full prepayment determined in accordance with the formula in subclause (1) is less than zero, then the reasonable estimate of that creditor's loss arising from the full prepayment is zero.

    Example

    A debtor is advanced $5,000 under a fixed rate contract. The contract is for a term of 2 years. For the first year the interest rate is fixed at 12% and the 12 monthly payments are $235.37. For the remainder of the term a floating interest rate applies. Full prepayment of the contract is made after 6 months and 5 days (5 days since the last payment due date) when the unpaid balance is $3,865.66. At the date of full prepayment, the annual fixed interest rate that the creditor usually charges on a fixed rate contract of the same or a similar type as the fixed rate contract that is to be fully prepaid with a term of 6 months (6 months being the nearest term to the unexpired portion of the fixed interest period of the fixed rate contract that is to be fully prepaid) is 10%. During the unexpired portion of the fixed interest period of the fixed rate contract that is to be fully prepaid, total payments of $1,412.22 would have been payable ($235.37 x 6 months), including total interest charges of $195.67. Applying the above formula, a reasonable estimate of the creditor's loss arising from the full prepayment is calculated as follows:

    .

    A reasonable estimate of the creditor's loss is $31.79.

    Note: For the purpose of this example only, calculations have been rounded to 9 decimal places.

    Regulation 11: substituted, on 1 April 2005, by regulation 4 of the Credit Contracts and Consumer Finance Amendment Regulations 2004 (SR 2004/359).

Model disclosure statements

  • Heading: added, on 1 April 2005, by regulation 4 of the Credit Contracts and Consumer Finance Amendment Regulations 2004 (SR 2004/359).

12 Model disclosure statements

  • For the purposes of section 34 of the Act—

    • (a) the model disclosure statement that may be used for the disclosure of information under section 17(1) of the Act for a consumer credit contract other than a revolving credit contract is set out in form 1 of Schedule 2:

    • (b) the model disclosure statement that may be used for the disclosure of information under section 17(1) of the Act for a revolving credit contract is set out in form 2 of Schedule 2:

    Regulation 12: added, on 1 April 2005, by regulation 4 of the Credit Contracts and Consumer Finance Amendment Regulations 2004 (SR 2004/359).

13 Terms and conditions for use of model disclosure statements

  • (1) A model disclosure statement may be—

    • (a) printed in any font and font size that is easily readable by a reasonable person:

    • (b) printed in any colour or colours:

    • (c) formatted with or without the use of borders or boxes around the text:

    • (d) extended to provide sufficient space or lines in each box to enable completion of the required information in accordance with subclause (2).

    (2) A model disclosure statement must be completed by—

    • (a) inserting in legible type or writing all of the information required by section 17(1) of the Act to be disclosed that is applicable to a particular consumer credit contract:

    • (b) omitting any information (including any alternative information requirement) that is not applicable to the particular consumer credit contract, either by deleting that information from the model disclosure statement or by clearly striking through the space on the model disclosure statement for the disclosure of that information:

    • (c) omitting the square brackets and the words in those square brackets that provide guidance for completion of the forms.

    (3) A model disclosure statement may not be completed by inserting the words “not applicable” to indicate that a requirement to disclose information is not applicable to a particular consumer credit contract.

    Regulation 13: added, on 1 April 2005, by regulation 4 of the Credit Contracts and Consumer Finance Amendment Regulations 2004 (SR 2004/359).

14 Format and layout may not be modified

  • Except as provided in these regulations, the format and layout of a model disclosure statement may not be modified.

    Regulation 14: added, on 1 April 2005, by regulation 4 of the Credit Contracts and Consumer Finance Amendment Regulations 2004 (SR 2004/359).

15 Other information

  • (1) The following information may be included in a model disclosure statement in addition to the information that must otherwise be disclosed in accordance with the Act and these regulations:

    • (a) the name and address of the debtor:

    • (b) any name, logo, mark, design, or other information relating to the creditor if that information is included in a manner that is not likely to deceive or mislead a reasonable person or detract from the information that is required to be disclosed by the Act.

    (2) Except as provided in subclause (1), no other information may be included in a model disclosure statement.

    Regulation 15: added, on 1 April 2005, by regulation 4 of the Credit Contracts and Consumer Finance Amendment Regulations 2004 (SR 2004/359).

16 Model disclosure statement may be divided into 2 parts

  • If a model disclosure statement is included as part of 1 or more documents, the model disclosure statement may be divided into no more than 2 parts with 1 part comprising only the statement relating to the debtor's right to cancel under section 27 of the Act.

    Regulation 16: added, on 1 April 2005, by regulation 4 of the Credit Contracts and Consumer Finance Amendment Regulations 2004 (SR 2004/359).

Other key information concerning consumer credit contract

  • Heading: added, on 1 April 2005, by regulation 4 of the Credit Contracts and Consumer Finance Amendment Regulations 2004 (SR 2004/359).

17 Other key information

  • (1) For the purposes of paragraph (v) of Schedule 1 of the Act the information set out in subclause (2) is information that is key information concerning a consumer credit contract.

    (2) The information referred to in subclause (1) is a description of the credit fees that are, or may become, payable by the debtor to, or for the benefit of, the creditor in connection with the credit contract (unless the credit fee is disclosed under paragraph (c) or paragraph (n) of Schedule 1 of the Act), including—

    • (a) when each of those credit fees is payable, if ascertainable; and

    • (b) the amount of each of those credit fees if ascertainable, but, if not, the method of calculation of the fee.

    Regulation 17: added, on 1 April 2005, by regulation 4 of the Credit Contracts and Consumer Finance Amendment Regulations 2004 (SR 2004/359).

Schedule 1
Assumptions that may be used or applied when disclosing information under Act

r 6

  • Schedule 1 number: added, on 1 April 2005, by regulation 5 of the Credit Contracts and Consumer Finance Amendment Regulations 2004 (SR 2004/359).

1 Interest charges and payments

  • In disclosing the information referred to in paragraphs (k), (l), and (o) of Schedule 1 of the Act, the creditor may assume—

    • (a) that, in the case of an annual interest rate, the rate disclosed will not vary over the term of the credit contract or any shorter period for which it applies; and

    • (b) that, in the case of a variable interest rate, the variable interest rate applicable over the period for which it applies is the same as the equivalent variable interest rate as at the date that the disclosure statement is prepared; and

    • (c) that the debtor will make payments required by the credit contract at the times required by the credit contract and of the amounts required under the contract.

2 Business day

  • Disclosure relating to payments, charges, or fees may be made on the assumption that every day is a business day.

3 Charges and fees

  • Disclosures relating to charges (other than interest charges) and fees may be made on the following assumptions:

    • (a) that there will be no change in the charges and fees as disclosed and no new fees or charges imposed; and

    • (b) that the charges and fees will be paid by the debtor at the times required by the credit contract and of the amounts required under the contract.

4 Date of advance being made

  • If disclosure involves an advance being made under the credit contract on a certain date and that date is not ascertainable at the time the disclosure statement is prepared, disclosure may be made on the assumption that the advance is made on a date specified in the disclosure statement as being the date on which the advance is most likely to be made.

Schedule 2
Model disclosure statements

r 12

  • Schedule 2: added, on 1 April 2005, by regulation 6 of the Credit Contracts and Consumer Finance Amendment Regulations 2004 (SR 2004/359).

Form 1

.
.
.

Form 2

.
.

Diane Morcom,
Clerk of the Executive Council.

Issued under the authority of the Acts and Regulations Publication Act 1989.

Date of notification in Gazette: 12 August 2004.

Contents

  • 1General

  • 2Status of reprints

  • 3How reprints are prepared

  • 4Changes made under section 17C of the Acts and Regulations Publication Act 1989

  • 5List of amendments incorporated in this reprint (most recent first)

Notes
1 General

  • This is a reprint of the Credit Contracts and Consumer Finance Regulations 2004. The reprint incorporates all the amendments to the regulations as at 1 April 2005, as specified in the list of amendments at the end of these notes.

    Relevant provisions of any amending enactments that have yet to come into force or that contain relevant transitional or savings provisions are also included, after the principal enactment, in chronological order.

2 Status of reprints

  • Under section 16D of the Acts and Regulations Publication Act 1989, reprints are presumed to correctly state, as at the date of the reprint, the law enacted by the principal enactment and by the amendments to that enactment. This presumption applies even though editorial changes authorised by section 17C of the Acts and Regulations Publication Act 1989 have been made in the reprint.

    This presumption may be rebutted by producing the official volumes of statutes or statutory regulations in which the principal enactment and its amendments are contained.

3 How reprints are prepared

  • A number of editorial conventions are followed in the preparation of reprints. For example, the enacting words are not included in Acts, and provisions that are repealed or revoked are omitted. For a detailed list of the editorial conventions, see http://www.pco.parliament.govt.nz/legislation/reprints.shtml or Part 8 of the Tables of Acts and Ordinances and Statutory Regulations and Deemed Regulations in Force.

4 Changes made under section 17C of the Acts and Regulations Publication Act 1989

  • Section 17C of the Acts and Regulations Publication Act 1989 authorises the making of editorial changes in a reprint as set out in sections 17D and 17E of that Act so that, to the extent permitted, the format and style of the reprinted enactment is consistent with current legislative drafting practice. Changes that would alter the effect of the legislation are not permitted.

    A new format of legislation was introduced on 1 January 2000. Changes to legislative drafting style have also been made since 1997, and are ongoing. To the extent permitted by section 17C of the Acts and Regulations Publication Act 1989, all legislation reprinted after 1 January 2000 is in the new format for legislation and reflects current drafting practice at the time of the reprint.

    In outline, the editorial changes made in reprints under the authority of section 17C of the Acts and Regulations Publication Act 1989 are set out below, and they have been applied, where relevant, in the preparation of this reprint:

    • •omission of unnecessary referential words (such as “of this section” and “of this Act”)

    • •typeface and type size (Times Roman, generally in 11.5 point)

    • •layout of provisions, including:

      • •indentation

      • •position of section headings (eg, the number and heading now appear above the section)

    • •format of definitions (eg, the defined term now appears in bold type, without quotation marks)

    • •format of dates (eg, a date formerly expressed as “the 1st day of January 1999” is now expressed as “1 January 1999”)

    • •position of the date of assent (it now appears on the front page of each Act)

    • •punctuation (eg, colons are not used after definitions)

    • •Parts numbered with roman numerals are replaced with arabic numerals, and all cross-references are changed accordingly

    • •case and appearance of letters and words, including:

      • •format of headings (eg, headings where each word formerly appeared with an initial capital letter followed by small capital letters are amended so that the heading appears in bold, with only the first word (and any proper nouns) appearing with an initial capital letter)

      • •small capital letters in section and subsection references are now capital letters

    • •schedules are renumbered (eg, Schedule 1 replaces First Schedule), and all cross-references are changed accordingly

    • •running heads (the information that appears at the top of each page)

    • •format of two-column schedules of consequential amendments, and schedules of repeals (eg, they are rearranged into alphabetical order, rather than chronological).

5 List of amendments incorporated in this reprint (most recent first)