The Credit Contracts and Consumer Finance Amendment Act and its accompanying responsible lending code take effect from June 6.
Minister of Commerce and Consumer Affairs Paul Goldsmith said it was the start of a new era in consumer lending.
From Saturday on, all lenders must meet responsible lending obligations and all consumers must have access to better information to help them make better borrowing choices.
Goldsmith said the new legislation gives greater protection to consumers borrowing money and helps ensure they can afford to repay the money they are borrowing.
Under the new law:
- Lenders must comply with new responsible lending obligations and those that repeatedly breach the new law can be banned from lending.
- Lenders will need to make information about their fees and interest rates publicly available, making it easier for consumers to compare rates and fees before borrowing money.
- Repossession agents will need to be licensed and there are new rules prohibiting repossession of essential household items such as beds and heaters.
- Credit card billing statements must include a minimum repayment warning.
Goldsmith said there will now be harsher penalties for lenders who don’t follow the rules, which will be enforced by the Commerce Commission.
“Our intention is not to impose unnecessary compliance costs on lenders who are already lending responsibly, but rather to provide additional protection from lenders who engage in predatory practices.”
Banking and mortgage sectors representatives have welcomed the new legislation – although they have warned that regulators will need to be vigilant in enforcing it.
