Study reveals legislation breaches and non-compliance amongst lenders

by Ksenia Stepanova01 Jun 2018

As many as 21% of lenders may not be complying with requirements set out by the Credit Contracts and Consumer Finance Act (CCCF Act), as revealed by a Commerce Commission study published this week.

The research was carried out to understand the potential scale of lender non-compliance in a several key areas, and to gather information on lender fees and interest rates.

The Commission reviewed a number of lender websites to identify whether they met specific CCCF Act requirements – these include publishing standard form contract terms clearly and prominently, displaying borrowing costs and fees charged by the lender, and providing information regarding the borrower’s right to cancel the contract. Interest rates were also examined.

The data reviewed 420 lenders, excluding major banks, which potentially provided customer credit.

Results revealed that of 215 lenders, 21% failed to meet obligations to clearly display borrowing costs, standard form contract terms and borrowers’ cancellation rights. Of those who did not comply with the requirement to publish costs of borrowing, 89% also did not comply with the requirement to publish standard contract form terms.

Of the same 215 lenders, seven appeared to have misrepresented the borrower’s cancellation rights.

The CCCF Act does not currently cap interest rates, and courts have the power to reopen contracts where they find interest rates to be oppressive. The highest interest rate was found to be 803% per annum, with a number of other lenders charging between 400 – 694%.

“In undertaking the analysis for this project, we identified a number of possible breaches of sections of the CCCF Act,” the Commerce Commission states. “If a lender does not comply with [these sections], the Commission can seek a declaration or an injunction effectively requiring the lender to publish the required information.”

The Commission has also launched a compliance project to explain its findings to lenders, and to provide further guidance regarding their obligations under the CCCF Act.

“We have contacted the majority of lenders identified and have issued an information outlining the possible breaches of the Act,” it continues. “Most lenders who were contacted confirmed a willingness to make changes to achieve compliance.”

A review of ongoing compliance is expected to be released later this year.


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