2-month delay to new Credit Contracts and Consumer Finance Regulations

The NZ Government has agreed to a short delay to the full commencement of the Credit Contracts Legislation Amendment Act 2019 by two months, to 1 December 2021.

Of significance to lenders and borrowers, the Government has agreed to a short delay to the full commencement of the Credit Contracts Legislation Amendment Act 2019 (the Amendment Act) by two months, to 1 December 2021.

This is considered necessary due to the impact of recent COVID-19 alert levels on lenders’ implementation of the reforms, which has disrupted training and other preparations and forced a reprioritisation of resources to support existing customers. This delay will include the regulations that were due to come into force on 1 October 2021, such as the Credit Contracts and Consumer Finance (Lender Inquiries into Suitability and Affordability) Amendment Regulations 2020.

MBIE says, the Government remains committed to implementing the credit reforms in a timely manner for the benefit of consumers. Decisions around a delay have not been made lightly, and the Government has a strong expectation that the Credit Contracts and Consumer Finance (Lender Inquiries into Suitability and Affordability) Amendment Regulations 2020 be implemented by no later than 1 December.

A few additional provisions of the Amendment Act will still come into force on 1 October 2021. These are, essentially, the requirements for creditors and mobile traders to receive certification by the Commerce Commission that their directors and senior managers are fit and proper persons for their positions. These provisions remain as-is. (Note that due diligence duties on directors and senior managers are delayed until 1 December).

Note that many of the reforms under the Amendment Act have already come into force over the past 18 months, and are unaffected by the above delay. These include:

  • increased penalties and statutory damages for breaches of responsible lending obligations
  • interest and fee caps on high-cost consumer credit contracts
  • all mobile trader contracts are treated as consumer credit contracts, whether or not they charge interest or fees, or take a security interest over goods.

The new Responsible Lending Code (https://www.mbie.govt.nz/assets/responsible-lending-code.pdf) will be updated to reflect the new start date. The Commerce Commission will also be updating its guidance.

MBIE are likely to shortly undertake a brief public consultation on reissuing the addendum to the Responsible Lending Code, which elaborates on and offer guidance on how lender responsibility principles and lender responsibilities may be implemented by lenders while dealing with borrowers who have been impacted by COVID-19 (see https://www.consumerprotection.govt.nz/assets/uploads/responsible-lending-code-covid-19-addendum.pdf). This guidance expired on 31 March 2021.

Ministers have agreed to progress legislative changes that will enable a new addendum to come into force more quickly (the default under the Act is 28 days). MBIE expects that the final regulations covering previously announced matters such as the content of annual returns and exceptions (e.g. transitional matters) and exemptions (e.g. for insurance premium funders, or non-financial services businesses), will be made before the end of September. Dates in regulations that were set relative to 1 October 2021 will be consequently shift by two months.