On 31 March, the Government introduced the Credit Contracts and Consumer Finance Amendment Bill (the Bill). This eagerly anticipated draft legislation forms part of ‘Phase 2’ of the Government’s Financial Services Law Reform programme. It follows the major announcements made by then-Minister Andrew Bayly in September 2024 in relation to the Credit Contracts and Consumer Finance Act 2003 (CCCFA).
The Bill faithfully reflects the key changes to the CCCFA that were announced in September. It also goes further than expected in some respects and includes a number of additional changes.
Key changes
As mentioned many parts of the Bill are ‘as expected’ following the Government announcements in September:
- Due Diligence duty: Director and senior manager due diligence duty under section 59B of the CCCFA is to be repealed
- Transfer from Commerce Commission to Financial Markets Authority: Existing provisions that contemplate Commerce Commission oversight are being amended or replaced with provisions that reference the Financial Markets Authority and the Financial Markets Conduct Act 2013. The timing of the transfer is tied to the commencement of section 62 of the Bill – which is the amendment that lists the CCCFA in the Schedule of the Financial Markets Authority Act 2011
- New Market Services Licence: The concept of the ‘fit-and-proper certifications’ which were previously administered by the Commerce Commission is being replaced with a system of compulsory licensing
- Changes to section 99(1A): It was expected that changes were to be made to the operation of section 99(1A) which concerns the consequences of a failure of a lender to provide correct disclosure in certain circumstances. The current wording in the CCCFA is hugely controversial, but despite industry and other petitioning, the Government had not committed to any ‘retrospective’ relief from the operation of this section. Consistent with the announcements, the Bill amends the law on a prospective basis – the key change being that section 99(1A) is being repealed and replaced with a new mechanism that
- provides that a court ‘may’ make an order with reference to the costs of borrowing (in contrast to s99(1A) which some argue to be an ‘entitlement’ of the borrower to a refund of the costs of borrowing)
- requires a borrower to demonstrate ‘loss or damage’ before the court can make such an order.
Another change relates to sections 95A and 95B (which permit a court to reduce the effect of a failure of a lender to make disclosure). Under the Bill, the operation of sections 95A and 95B of the CCCFA would be extended to apply to the time period between 6 June 2015 and 20 December 2019. This change was not part of previous Government announcements.
Other changes
The Bill includes various other changes, some of which were expected, but a number of which were not part of previous announcements. Generally, these changes seem sensible to us – although we suspect there will be various further amendments and refinements needed as impacted parties and other stakeholders have input on the Bill through the legislative process.
The below table summarises a number of these additional changes.
|
Change |
Explanation |
| Repayment Waivers |
The definition of ‘repayment waivers’ is expanded to include an agreement to waive the amounts payable to the extent the amounts payable exceeds an insurance payout. Repayment waivers are being brought within the cancellation right under section 27. There is a new separate cancellation right (s 27A) that will apply specifically to repayment waivers. The separate right will not apply if the repayment waiver is compulsory as part of entry into the main consumer credit contract (and the fact that it is compulsory is a ‘reasonable’ requirement). |
|
Material changes |
Certain circumstances are excluded from the concept of ‘material changes’. This includes a lender paying unpaid rates or paying amounts to protect their secured property under the Property Law Act 2007. |
|
Exceptions to the continuous disclosure requirement |
If certain specified key information is accessible online at all reasonable times, then continuing disclosure is not required. |
|
Timing of agreed change |
Timing of agreed change disclosure – expands the classes of changes to consumer credit contracts that can be disclosed after the change (rather than before the change takes effect). |
|
Disclosure |
Disclosure to a guarantor is not required for a guarantor who is a trustee or a partner. |
|
Considerations of the court: Pecuniary Penalties |
In applying pecuniary penalties, the court must have regard to some matters (in addition to the current mandatory considerations) including:
|
The new Bill is a significant step in the ongoing shift in how lending is regulated. We consider it is well aligned with the Government’s stated aims of balancing the need for greater flexibility with the demand for responsible lending. The willingness of the Government to make critical legislative change is welcome although care will needed to ensure that that all necessary changes to achieve their aims have been made.
Our leading CCCFA team has been working hard to advocate for a more balanced regime focussed more squarely on consumer protection and predatory lenders and will continue to track the progress of the Bill very closely. We would be very happy to discuss the potential impacts of the new legislation on your business or any other aspect of the above. We have extensive experience in supporting clients through major regulatory changes and are very well equipped to help with all of the potential impacts that will flow from the enactment of this legislation.
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