Revised draft credit fees guidelines released
12 May 2010
The Commerce Commission today released revised draft guidelines outlining the Commission's enforcement approach to credit fees under the Credit Contracts and Consumer Finance Act (CCCF Act).
The draft guidelines, which are aimed at providing guidance for the credit industry, focus on section 41 of the CCCF Act which prohibits unreasonable credit and default fees. The guidelines also discuss sections 42 and 44, which set out the rules for determining whether establishment, credit and other default fees breach section 41. The draft guidelines were revised in light of submissions received following circulation by the Commission of an earlier version for consultation in 2009.
"The guidelines will be updated as court precedent is available to provide further clarification on these sections of the CCCF Act," said Graham Gill, Commerce Commission Fair Trading Manager, Auckland. "The Commission has a number of credit fees cases currently before the Courts that are likely to assist with this. An aspect of section 44 of the CCCF Act which particularly 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."
The draft guidelines do not deal with creditors passing on third party fees to debtors or full pre-payment fees (also known as break fees) under the CCCF Act.
The draft guidelines are available on the Commission's website at www.comcom.govt.nz/consumer-credit
Credit Contracts and Consumer Finance Act 2003
The Commerce Commission has statutory responsibility for enforcing the Credit Contracts and Consumer Finance Act (CCCF Act).
A creditor who is found to be in breach of the CCCF Act:
- may be liable for statutory damages; and
- may be liable, on criminal conviction, to a fine of up to $30,000.00; and
- may be banned by the court from providing consumer credit.