A lender can only charge reasonable fees for lending. Read this guide to understand when a lender can charge fees and their obligations.
Lending fees and charges are what you need to pay as part of your loan agreement.
You may need to pay fees when you arrange the loan, or when a particular event happens.
Your loan agreement will confirm what fees and charges apply to you.
Lenders have an obligation to charge reasonable fees and give you information about them.
Part of treating customers fairly means a lender cannot charge unreasonable fees.
It’s helpful to understand what a lender must do before it can charge fees. If consumers feel that they are being treated unfairly they should make a complaint so this can be reviewed.
Mr Bee’s* credit card fees
Mr Bee made a complaint after he was charged fees for a credit card that he never used. Mr Bee had applied for a credit card when he bought a washing machine. His application was accepted, but he decided he didn’t want the card. He never activated it.
The lender charged fees for the credit card and sent the debt to collections when it wasn’t paid. The IFSO Scheme reviewed Mr Bee’s contract. The conditions of use said acceptance of the contract occurred when the card was activated or used, and this had not happened in Mr Bee’s case. The lender should not have charged the fees and it agreed to settle the complaint with Mr Bee.
Mr Zed’s* high fees review
Mr Zed thought he had been charged high fees on his loan account and asked the lender to review this. Mr Zed made a complaint because the lender said the fees had been charged correctly. The IFSO Scheme reviewed the fees and received information from the lender to indicate that the fees charged were reasonable.
The IFSO Scheme found Mr Zed had been charged a higher repossession fee than the amount in the contract. However, the lender had already assisted Mr Zed to pay off his loan by not requiring him to pay any default fees after he had missed payments. This meant Mr Zed had paid significantly less under the contract than he was required to pay. The IFSO Scheme said the lender did not need to reimburse Mr Zed for the repossession fee.
*Names have been changed
When you arrange a loan, your lender must give you information about all the fees you might need to pay.
This information must be clear so you can understand what each fee is for and when it is charged.
If your contract allows a lender to change its fees, it must give you information about the change at least 5 working days beforehand.
The types of fees and charges in a loan agreement include:
A lender must make sure its fees and charges are reasonable. The lender should not make a profit from the fees it charges. There should be a connection between the fee charged and the cost to the lender.
If the lender is charging a fee for third-party work, this should be passed on “at cost”. This means the lender should not charge more than what the third-party has charged for the service.
If a lender has not provided you with information about its fees, or has charged an unreasonable fee, there may be remedies available, including compensation.
I think the fees I’ve been charged are not reasonable – what do I do now?
You can request a review of the fees through your lender’s internal complaints process. If you are unhappy with the complaint response, you can ask the IFSO Scheme to investigate your complaint, for free.
If you would like the support of a financial mentor to help understand your circumstances, you may wish to contact Moneytalks. Moneytalks is a free service that supports people and whānau to manage their money and obtain the financial support they need.
You did not know about the fee or charge
Your lender must give you information about the fees when you arrange the loan.
Check the documents you received when you arranged the loan. You can request these documents from your lender. If information about the fees or changes is missing, you should make a complaint to your lender.
You have been charged for work that didn’t happen
A lender can only charge fees for actions it has done. For example, it can charge a fee for the work required to set up your loan account.
If you have been charged a fee for work that wasn’t done, you can make a complaint to your lender to have this issue reviewed.
The fee is higher than you expected
A lender must make sure the fees it charges are reasonable. This means it cannot profit from its fees.
If you feel that you have been charged an unreasonable amount, you can make a complaint to the lender. You can ask the lender to share what work the fee relates to.