Credit Contracts and Consumer Finance Amendment Regulations 2015

2015/57

Coat of Arms of New Zealand

Credit Contracts and Consumer Finance Amendment Regulations 2015

Jerry Mateparae, Governor-General

Order in Council

At Wellington this 23rd day of March 2015

Present:
His Excellency the Governor-General in Council

Pursuant to section 138(1) of the Credit Contracts and Consumer Finance Act 2003, His Excellency the Governor-General makes the following regulations, acting—

  • (a) on the advice and with the consent of the Executive Council; and

  • (b) on the recommendation of the Minister of Commerce and Consumer Affairs made in accordance with section 138(1A) of the Credit Contracts and Consumer Finance Act 2003.

Regulations

1 Title

  • These regulations are the Credit Contracts and Consumer Finance Amendment Regulations 2015.

2 Commencement

  • These regulations come into force on 6 June 2015.

3 Principal regulations
4 New regulations 4A to 4D and cross-heading inserted

  • After regulation 4, insert:

    “Publication of costs of borrowing information

    “4A Publication of costs of borrowing information

    • “(1) This regulation applies for the purpose of section 9K of the Act.

      “General rules

      “(2) The information required to be made publicly available (costs of borrowing information) must contain, for every class of credit contract offered by the creditor, the information prescribed by regulations 4B to 4D.

      “Rules about publication on Internet sites

      “(3) To meet the requirements under section 9K(3)(a) of the Act,—

      • “(a) each part of the costs of borrowing information for a class of credit contracts must be presented with the other parts of the costs of borrowing information for that class of credit contracts in a form that enables a borrower to ascertain readily the total costs of borrowing (for example, interest rates and fees for a class of credit contracts may be presented together on the same webpage or with prominent links provided between them); and

      • “(b) the costs of borrowing information must be accessible at all reasonable times.

      “Rule when information supplied on request

      “(4) Costs of borrowing information that is supplied to a requestor under section 9K(4) of the Act must include the date from which the information applies (for example, fees current as at [date]) or the date on which the information is supplied.

    “4B Information about interest rates

    • “(1) The costs of borrowing information must include—

      • “(a) the annual interest rate or rates (with the rate or rates being expressed in terms of a percentage); and

      • “(b) if there is more than 1 rate, how or when each rate applies; and

      • “(c) if an annual interest rate is fixed for a period, the period during which the annual interest rate is fixed; and

      • “(d) if an annual interest rate is variable or adjustable, a statement to that effect.

      “(2) The rate or rates made publicly available in the costs of borrowing information—

      • “(a) must be the rate or rates that are ordinarily available to borrowers who meet the lender’s borrowing requirements for that class of credit contracts; and

      • “(b) must be the current annual interest rate or rates, if the rate is variable or adjustable; and

      • “(c) must, if expressed by reference to a range, be accompanied by a brief description of the factors that the lender may consider to determine the specific interest rate for particular classes of borrower.

      “(3) If a higher interest rate than the rate or rates made publicly available under subclauses (1) and (2) may apply to a specific borrower (or class of borrowers) or in specific situations, the costs of borrowing information must include—

      • “(a) a statement to that effect; and

      • “(b) a brief description of the factors that the lender may consider to determine the specific interest rate for that borrower or those borrowers or situations (if applicable); and

      • “(c) the margin (or maximum margin) that may be added or the interest rate (or maximum interest rate) that may apply (if known).

      “(4) If a higher interest rate may be imposed under the contract in the event of a default in payment or the credit limit being exceeded, this regulation applies as follows:

      • “(a) references to annual interest rate include the default interest charge rate; and

      • “(b) the creditor must make the costs of borrowing information for the default interest charge rate publicly available in accordance with this regulation separately from the information on the annual interest rates.

    “4C Information about charging interest

    • “(1) The costs of borrowing information must include a brief description of the frequency with which interest charges may be debited under the contract.

      “(2) However, the costs of borrowing information need not include that description if interest charges will always be debited as frequently as, or less frequently than, payments become due under the contract.

    “4D Information about credit fees and default fees

    • The costs of borrowing information must contain a description of the credit fees and default fees that are, or may become, payable, including—

      • “(a) when each fee is, or will become, payable; and

      • “(b) the amount (or maximum amount) of each fee if ascertainable, or, if not, the method of calculation of the fee.”

5 New regulation 4E and cross-heading inserted

  • Before the cross-heading above regulation 5, insert:

    “Minimum repayment warning

    “4E Minimum repayment warning

    • “(1) For the purposes of section 19(i) of the Act, the prescribed minimum repayment warning required in the case of a credit card contract is as follows:

      “‘If you make only the minimum payment each month*, you will pay more interest and it will take you longer to pay off your balance. Visit www.sorted.org.nz/creditcards to calculate how you can pay off your credit card balance faster and pay less in interest.

      “‘*Replace with other payment period, if applicable.’

      “(2) The format, font, and font size of the minimum repayment warning must be easily readable.

      “(3) The minimum repayment warning must be presented reasonably close to the amount stated as the minimum payment for each payment period.

      “(4) No minimum repayment warning is required to be included in a continuing disclosure statement in the case of a credit card contract if—

      • “(a) the closing unpaid balance is below $100; or

      • “(b) a payment arrangement between the creditor and debtor replaces the minimum payment that would otherwise be required under the contract to be paid in each payment period; or

      • “(c) an interest-free period applies to the closing unpaid balance.

      “Compare: National Consumer Credit Protection Regulations 2010 r 79B (Aust)”.

6 New regulations 7A and 7B and cross-headings inserted

  • After regulation 7, insert:

    “Rebate of repayment waiver

    “7A Rebate of repayment waiver

    • For the purposes of section 52A of the Act, the rebate for the repayment waiver must be calculated in accordance with the following formula:

      y = (p × s × (s + 1)) ÷ (t × ( t + 1))

      where—

      y
      is the amount of the rebate of the consideration paid for the repayment waiver
      p
      is the amount of the consideration paid for the repayment waiver
      s
      is the number of whole months in the unexpired portion of the period for which the repayment waiver applied
      t
      is the number of whole months for which the repayment waiver applied.

    “Rebate of extended warranty

    “7B Rebate of extended warranty

    • For the purposes of section 52B of the Act, the rebate for the extended warranty must be calculated in accordance with the following formula:

      y = p × s ÷ t

      where—

      y
      is the amount of the rebate of the consideration paid for the extended warranty
      p
      is the amount of the consideration paid for the extended warranty
      s
      is the number of whole months in the unexpired portion of the period for which the extended warranty applied
      t
      is the number of whole months for which the extended warranty applied.
7 New regulation 18 and cross-heading inserted

  • After regulation 17, insert:

    “Exemptions

    “18 Exemptions from provisions relating to consumer credit contracts where local authority to provide credit

    • “(1) A credit contract is exempt from the application of the provisions of the Act that are listed in subclause (2) if—

      • “(a) the contract provides for a local authority to provide credit in connection with the funding of an activity on a rating unit; and

      • “(b) the contract provides that the creditor is to collect the amounts payable under the contract to the creditor by means of a targeted rate on the rating unit.

      “(2) The provisions of the Act referred to in subclause (1) are as follows:

      • “(a) section 18 (continuing disclosure):

      • “(b) section 38 (early debit or payment of interest charges prohibited):

      • “(c) section 41 (unreasonable credit fee or default fee) as it applies in relation to default fees:

      • “(d) section 51 (amount required for full prepayment):

      • “(e) subpart 8 of Part 2 (changes on grounds of unforeseen hardship).

      “(3) The exemptions given by subclause (1) do not apply if—

      • “(a) a person other than a local authority is a creditor under the contract; or

      • “(b) credit is provided under the contract otherwise than in connection with the funding of the activity on the rating unit; or

      • “(c) the contract is a revolving credit contract.

      “(4) The exemption given by subclause (1) from the application of section 18 of the Act is subject to the condition that the creditor complies with section 18(1) of the Act as if the maximum period for a continuing disclosure statement were 12 months.

      “(5) The exemption given by subclause (1) from the application of subpart 8 of Part 2 of the Act applies only if—

      • “(a) the local authority that sets (or is to set) the targeted rate has a rates remission policy adopted under section 109 of the Local Government Act 2002 or a rates postponement policy adopted under section 110 of that Act; and

      • “(b) the objectives stated in the adopted policy in accordance with section 109(1)(a) or 110(1)(a) of the Local Government Act 2002 include—

        • “(i) an objective of assisting ratepayers whose ability to pay their rates is impaired because they are in financial difficulty; or

        • “(ii) an objective that is substantially the same as the objective referred to in subparagraph (i).

      “(6) In this regulation,—

      “local authority has the meaning given by section 5 of the Local Government (Rating) Act 2002

      “rate has the meaning given by section 5 of the Local Government (Rating) Act 2002

      “ratepayers is to be read in accordance with section 10 of the Local Government (Rating) Act 2002

      “rating unit means a rating unit for the purposes of the Rating Valuations Act 1998

      “targeted rate means a rate set under section 16 of the Local Government (Rating) Act 2002.

      “(7) This regulation applies only to credit contracts entered into on or after 6 June 2015.”

8 Schedule 2 replaced

Schedule
Schedule 2 replaced

r 8

Schedule 2
Model disclosure statements

r 12

Form 1

Disclosure Statement for Consumer Credit Contracts (other than revolving credit contracts) Page 1 of 5.
Disclosure Statement for Consumer Credit Contracts (other than revolving credit contracts) Page 2 of 5.
Disclosure Statement for Consumer Credit Contracts (other than revolving credit contracts) Page 3 of 5.
Disclosure Statement for Consumer Credit Contracts (other than revolving credit contracts) Page 4 of 5.
Disclosure Statement for Consumer Credit Contracts (other than revolving credit contracts) Page 5 of 5.

Form 2

Disclosure Statement for Revolving Credit Contracts Page 1 of 4.
Disclosure Statement for Revolving Credit Contracts Page 2 of 4.
Disclosure Statement for Revolving Credit Contracts Page 3 of 4.
Disclosure Statement for Revolving Credit Contracts Page 4 of 4.

Michael Webster,
Clerk of the Executive Council.

Explanatory note

This note is not part of the regulations, but is intended to indicate their general effect.

These regulations, which come into force on 6 June 2015, prescribe matters necessary to the operation of new obligations and responsibilities introduced by amendments to the Credit Contracts and Consumer Finance Act 2003 (the CCCFA) made by the Credit Contracts and Consumer Finance Amendment Act 2014. The regulations also provide for certain exemptions from the application of certain provisions of the CCCFA.

Publication of costs of borrowing information

Regulation 4 prescribes the costs of borrowing information that creditors must make publicly available pursuant to new section 9K of the CCCFA. That section requires every creditor—

  • to ensure that information about all the costs of borrowing in relation to every class of credit contracts offered by that creditor is publicly available; and

  • to display prominently and clearly on the creditor’s Internet site the credit fees, default fees, and annual rates of interest (and default interest charge rates) in relation to every class of credit contracts (if the creditor has an Internet site); and

  • to display prominently and clearly on any of its business premises that are accessible to the public a notice that a copy of the information about those credit fees, default fees, and rates is available on request (free of charge); and

  • immediately after receiving the request of any person, to supply a copy of that information, free of charge, to that person.

The information prescribed by regulation 4 is based on that prescribed by Schedule 1 of the CCCFA as the information that must be disclosed to individual debtors, but is tailored to reflect the fact that key information relates to a specific borrower entering into a particular contract, while costs of borrowing information is intended to ensure creditors publish generic information about credit products so that consumers can compare the different products easily.

Credit card minimum repayment warning

Regulation 5 prescribes the credit card minimum repayment warning that continuing disclosure statements for credit card contracts are required to contain under amended section 19 of the CCCFA.

Proportionate rebate formula

Regulation 6 prescribes the proportionate rebate formula to be used to calculate the portion of the consideration paid for a repayment waiver and an extended warranty that must be applied to reduce the amount required for full prepayment, according to section 51 of the CCCFA.

Exemptions

Regulation 7 gives exemptions in relation to “VTR schemes”. In general terms, these are schemes run by local authorities under which credit may be provided to a ratepayer to fund work on a rating unit for the ratepayer’s benefit. The credit contract is administered through the rates system.

New regulation 18(1) sets out the following 2 requirements that must be met in relation to a credit contract for it to be exempted:

  • the contract provides for a local authority to provide credit in connection with the funding of an activity on a rating unit. See section 6 of the CCCFA for the definition of credit. New regulation 18(6) defines local authority by reference to section 5 of the Local Government (Rating) Act 2002 (the LG(R)A 2002). New regulation 18(6) defines rating unit by reference to the Rating Valuations Act 1998. Generally, any parcel of land for which there is a certificate of title is a rating unit (see sections 5B and 5C of the Rating Valuations Act 1998). Rates set by local authorities under the LG(R)A 2002 are set by reference to rating units:

  • the contract provides that the creditor is to collect the amounts payable under the contract to the creditor by means of a targeted rate on the rating unit. New regulation 18(6) defines targeted rate by reference to section 16 of the LG(R)A 2002. Under that section, a targeted rate may be set by a local authority for specific activities identified in the authority’s funding impact statement and need not be set in relation to all rateable land in the authority’s district.

New regulation 18(2) lists the provisions of the CCCFA from which an exemption is given. All the provisions are contained in Part 2 of the CCCFA, which regulates consumer credit contracts (see subpart 1 of Part 2). The provisions are as follows:

  • section 18, which requires the creditor under a consumer credit contract to disclose certain information to the debtor at least once every 6 months. New regulation 18(4) makes this exemption subject to the condition that the creditor discloses the required information at least once every 12 months:

  • section 38, which provides that a creditor under a consumer credit contract must not require the payment of, or debit, an interest charge at any time before the end of the day to which the interest charge applies:

  • section 41, which provides that a consumer credit contract must not provide for unreasonable credit or default fees. This exemption applies only in relation to default fees:

  • section 51, which limits the amount that may be required for the full prepayment of a consumer credit contract:

  • subpart 8 of Part 2, which gives a debtor under a consumer credit contract rights to request changes to the contract if the debtor is suffering hardship as a result of, for example, illness or loss of employment. New regulation 18(5) provides that this exemption applies only if the local authority that sets (or is to set) the targeted rate has a rates remission policy adopted under section 109 of the Local Government Act 2002 or a rates postponement policy adopted under section 110 of that Act. A local authority with a rates remission policy may remit rates on a rating unit under section 85 of the LG(R)A 2002 and a local authority with a rates postponement policy may postpone the requirement to pay rates on a rating unit under section 87 of the LG(R)A 2002. New regulation 18(5) requires the adopted policy to have an objective of assisting ratepayers whose ability to pay their rates is impaired because they are in financial difficulty or an objective that is substantially the same as that objective.

New regulation 18(1) and (2) is supplemented by new regulation 18(3), which provides that the exemptions do not apply in certain circumstances.

Model disclosure statements

Regulation 8 prescribes updated forms for the model disclosure statements to reflect new initial disclosure obligations and timeframes that are prescribed by the amended CCCFA, pursuant to amended section 17 of the CCCFA.

Statement of reasons

The following statement of reasons is published for the purposes of section 138(1B) of the Credit Contracts and Consumer Finance Act 2003.

The Minister of Commerce and Consumer Affairs, having had regard to the purposes of the Credit Contracts and Consumer Finance Act 2003 set out in section 3 of that Act as required by section 138(1A)(a) of that Act, and being satisfied as to the matters set out in section 138(1A)(b) and (c)(ii) of that Act, considers the exemptions given by regulation 7 of these regulations to be appropriate because—

  • the provisions of the Act from which the exemptions are given overlap with similar requirements set out under local government legislation; and

  • exempting VTR scheme providers from these provisions is unlikely to cause detriment to debtors as local government legislation provides sufficient protections for debtors in each case. The purposes of the Act to protect the interests of consumers and promote their confident and informed participation in markets for credit will continue to be met; and

  • requiring VTR scheme providers to comply with the overlapping requirements of the Act and local government legislation would require councils to comply with onerous and burdensome requirements. Councils would have to change the way they administer VTR schemes to comply, which would result in unnecessary compliance costs that may be passed on to borrowers.

Regulatory impact statement

The Ministry of Business, Innovation, and Employment produced regulatory impact statements in January 2015 to help inform the decisions taken by the Government relating to the contents of this instrument.

Copies of these regulatory impact statements can be found at—

Issued under the authority of the Legislation Act 2012.

Date of notification in Gazette: 26 March 2015.

These regulations are administered by the Ministry of Business, Innovation, and Employment.