Commerce and Consumer Affairs minister Paul Goldsmith has today released a discussion document on credit contracts.
It will shine a light on the rights of borrowers when they find themselves in a situation where a lender did not properly disclose key information about their loan.
“A number of legal consequences result from a failure by a lender to make proper disclosure of key information to debtors. These include a right for the consumer to cancel the loan and a fine for the lender,” said Goldsmith.
“However, under section 99(1A) of the Credit Contracts and Consumer Finance Act, the lender will forfeit the right to any interest or charges for the period during which it failed to make proper disclosure. In other words, lenders can find themselves in circumstances where they receive 0% interest on their loan.
“Concerns have been raised that this rule might lead to unfair outcomes, particularly where the information a lender fails to disclose is inconsequential to the loan or where the borrower suffers no harm.
“The discussion document outlines a range of alternatives to the current rule for public consideration.”
Consultation on the discussion paper will run until 22 November.
More details on the discussion document can be found here.