Guidelines for Credit Fees

One of the Commission's functions under the Credit Contracts and Consumer Finance Act (the Act) is to make available information to interested persons in order to promote compliance with the Act.

The Draft Guidelines for Credit Fees (2010) have not been finalised and have been superseded by case-law since that date. In particular, the High Court judgment in CC v Sportzone/MTF (available below) contains the most recent judicial guidance on credit fees issues. A summary of this guidance can be found below.

The Commission will not be publishing finalised Guidelines until there is greater certainty as to the legal principles to be applied by the Courts, and the current law reform in this area has been completed. Readers looking for guidance should consider the Draft Guidelines in the light of the subsequent Sportzone/MTF decision.

Draft Guidelines for Credit Fees

These guidelines describe the Commission's enforcement approach to fees subject to the Act, in particular to establishment fees, other credit fees and default fees[1].

The Act has been fully in force for some time and the Commission considers it appropriate to release guidelines in light of what has developed over that time both judicially and through its practice and experience of enforcing the CCCF Act. The guidelines represent the Commission's current views about the fees provisions of the CCCF Act. They will be modified as judicial precedent becomes available.

Although it is the court's role to decide whether or not a credit or default fee is unreasonable, in the absence of judicial precedent the Commission recognises that creditors may wish to consider the Commission's enforcement approach to fees.

The approach within the guidelines is not binding. However the guidelines should provide creditors with an indication of factors which may trigger a Commission investigation. The guidelines are not intended to be a substitute for legal advice or to provide an exhaustive list of the factors the Commission may take into account when assessing alleged breaches of the CCCF Act against its enforcement criteria. The Commission will continue to exercise its discretion in determining which conduct or issues it investigates and which enforcement outcomes are appropriate in any given situation.

The draft guidelines were revised in light of submissions received following circulation by the Commission of an earlier version for consultation on 1 April 2009. The current version was published on 12 May 2010.

An aspect of section 44 of the CCCF Act which still requires clarification is the application of "reasonable standards of commercial practice". The Commission is going to work with the credit industry to try and establish some agreed approaches.

[1] The guidelines do not deal with loss under prepayment (section 54).