NZ Level 5 Personal Lending cheat sheet

Core statutes: Credit Contracts and Consumer Finance Act 2003 (CCCFA) governs consumer credit contracts, disclosure, fees, hardship and repossession; Fair Trading Act 1986 covers misleading conduct; Privacy Act 2020 governs credit reporting and information handling.

CCCFA lender responsibility principles (s 9C) require lenders to exercise care, diligence and skill in advertising, before entering an agreement, and when dealing with changes, hardship, and enforcement - the standard is reasonableness, not perfection.

A consumer credit contract is one where the debtor is a natural person and credit is provided predominantly for personal, domestic or household purposes; business-purpose lending falls largely outside CCCFA consumer protections.

Buy-now-pay-later and deferred payment providers became subject to CCCFA affordability and disclosure obligations following the 2021 amendments; check whether a product is a 'consumer credit contract' before applying lender responsibility duties.

Interest rate caps do not exist in New Zealand consumer credit law; instead, CCCFA regulates unreasonable fees (s 41-44) and oppressive contracts (s 118 Credit Contracts and Consumer Finance Act / Part 5).

The Financial Markets Conduct Act 2013 and Financial Service Providers (Registration and Dispute Resolution) Act 2008 require lenders and advisers to be registered on the FSPR and belong to an approved dispute resolution scheme.

AML/CFT Act 2009 requires customer due diligence, identity verification, and suspicious activity reporting for lenders in scope; keep records for at least five years after the business relationship ends.

Commerce Commission enforces CCCFA; the Financial Markets Authority oversees conduct for some lending and financial advice; the Banking Ombudsman Scheme and Financial Services Complaints Ltd are approved dispute resolution schemes.

Initial disclosure must be made before the contract is entered into and includes key terms: credit limit, interest rate, fees, repayment method, default interest, and the right to cancel or seek hardship.

Continuing disclosure: variation disclosure within five working days of a change; annual continuing disclosure for revolving credit; request disclosure on request (within five working days, or as agreed).

Cancellation rights: debtor may cancel a consumer credit contract within three working days of receiving initial disclosure (or five working days of entering, whichever is later) by any means; lender must refund within 15 working days of cancellation.

Responsible lending requires an affordability assessment before entering the agreement and before increasing the credit limit - verifying income, expenses, and likely ability to repay without substantial hardship.

Advertising must not be misleading; if an interest rate is advertised, the lender must also state fees and charges or indicate where they can be found, and avoid 'no fees' claims where fees exist.

Prohibited conduct includes oppressive contracts, unreasonable fees (assessed against costs plus reasonable profit margin), and recovery of repossession costs beyond what is permitted.

Lenders must not accept a repayment promise they know is unsustainable; documenting the borrower's surplus income and buffers supports compliance with the lender responsibility principles.

Disclosure of total cost of credit: the total of interest, fees and charges over the term must be shown in initial disclosure for fixed-term loans.

Unsecured personal loan: fixed term, fixed or variable rate, principal and interest repayments; no security, higher rate reflecting unsecured risk.

Credit card / revolving credit: minimum monthly payment typically 2-5% of balance; interest charged daily on outstanding balance; interest-free period applies only if full balance paid by due date.

Overdraft: demand facility attached to a transaction account; repayable on demand; suitable for short-term cashflow gaps, not long-term borrowing.

BNPL / deferred payment: short instalment schedules, merchant-funded, low or no interest but late fees apply; CCCFA affordability checks now apply to many providers.

Debt consolidation: refinances multiple debts into one loan - lower rate or longer term reduces repayment but can increase total interest; check whether consolidating short-term high-cost debt into long-term secured debt is appropriate.

Secured personal loan (vehicle or other asset): lower rate than unsecured, but repossession risk; loan-to-value ratio drives rate and approval.

Home loan top-up / revolving credit facility: uses residential security; lower rate but puts home at risk; treat as a significant decision requiring documented suitability analysis.

Guarantor loan: third party guarantees repayment; guarantor must receive independent legal advice and full disclosure of the guaranteed obligation under CCCFA.

Affordability assessment steps: identify income (verified), identify expenses (verified where possible), calculate surplus, apply buffer for rate rises and life changes, assess ability to repay without substantial hardship.

Verification hierarchy: payslips, bank statements (typically 90 days), IRD income summary, employer letter; self-employed income verified via financial statements or IRD records.

Credit report checks: defaults, judgments, insolvency, repayment history, enquiries; a clear bureau file does not replace income/expense verification.

Negative credit signals: defaults over a threshold, bankruptcy (undischarged), No Asset Procedure, insolvency, recent high enquiry volume, missed payments - each triggers policy review or decline.

Debt-to-income and surplus ratios are lender policy tools; a common rule of thumb is total debt servicing below 40-50% of gross income, but policy varies.

Stress testing: assess repayment at a higher rate (e.g., +2% or the lender's test rate) and consider reduced income scenarios such as parental leave or redundancy.

Expense benchmarks: use bank statement analysis plus statistical benchmarks (e.g., household expenditure guides) to sanity-check declared expenses; do not rely solely on declared figures.

Lending criteria must be applied consistently; record the rationale for any policy exception, including compensating factors and approval authority.

Security types: mortgage over real property, security interest over a motor vehicle (registered on the Personal Property Securities Register), general security agreement over business assets.

PPSR registration perfects a security interest; register promptly after signing; check existing registrations before advancing funds.

Guarantee requirements: guarantor must receive a copy of the guarantee and credit contract, be advised to seek independent legal advice, and understand the extent of liability.

CCCFA protections extend to guarantors: pre-contract disclosure, cancellation rights, and the lender responsibility principles apply to guarantors as debtors.

Loan structuring considerations: term, repayment frequency (weekly/fortnightly/monthly), fixed vs variable rate, redraw facility, offset account, and early repayment terms.

Fixed-rate loans may carry an early repayment adjustment (break fee) if repaid early; disclose this before signing.

Joint borrowers are jointly and severally liable; consider whether both parties' incomes and obligations are assessed and whether relationship property implications exist.

Security valuation: registered valuation or desktop valuation depending on LVR; loan-to-value ratio caps depend on lender policy and whether the loan is owner-occupied or investment.

Default occurs when a payment is missed or another contractual obligation is breached; the lender must issue a notice before enforcing, giving the debtor a reasonable opportunity to remedy.

Hardship application: debtor may apply for a variation on grounds of illness, injury, loss of employment, end of relationship, or other reasonable cause; lender must respond within a reasonable time (usually 20 working days) and consider reducing payments, extending term, or postponing payments.

If hardship is granted, the lender must not enforce the security during the agreed hardship period; if declined, written reasons must be given.

Repossession: requires a court order unless the debtor has voluntarily surrendered the goods; a repossession notice and a post-repossession statement of account are mandatory.

Collections conduct must comply with the Fair Trading Act and CCCFA - no harassment, misleading threats, or disclosure of debt to third parties without consent.

Dispute resolution: internal complaints process first, then the approved dispute resolution scheme (e.g., Banking Ombudsman, Financial Services Complaints Ltd); scheme decisions are binding on the lender.

Statutory limitation: debts are generally recoverable for six years from the date of default under the Limitation Act 2010; check for acknowledgments that restart the period.

Record-keeping: retain default notices, hardship applications and outcomes, collection contact logs, and dispute correspondence for at least seven years.

Duty of care: act in the client's interest, prioritise their needs over commission or sales targets, and avoid conflicts of interest or disclose and manage them.

Vulnerable customers: identify signs of financial difficulty, illness, bereavement, family violence or limited literacy; adjust communication and consider referral to support services.

Suitability: recommend products that match the client's objectives, financial situation and risk tolerance; document why the recommendation fits.

Confidentiality: collect and use personal information only for disclosed purposes under the Privacy Act 2020; obtain consent for credit checks and third-party disclosure.

Professional standards: maintain competence via continuing education, follow codes of conduct (e.g., Financial Advice NZ code, lender codes), and avoid misleading or high-pressure sales tactics.

Fairness in pricing: fees must reflect actual costs plus reasonable margin; avoid penalty-style fees that punish rather than recover cost.

Cultural competence: recognise Te Tiriti o Waitangi obligations and Māori client needs; use appropriate communication and support where literacy or language barriers exist.

Whistleblowing and escalation: report suspected fraud, mis-selling or breaches of lender responsibility to a manager or compliance function.

Financial advice providers must be licensed under the Financial Markets Conduct Act 2013 (FAP regime); individual advisers operate under a FAP licence with defined duties.

Code of Professional Conduct for Financial Advice Services: duties of care, diligence and skill; acting in the client's interest; disclosure of conflicts; competence; and record-keeping.

Disclosure requirements: nature and scope of advice, fees, conflicts of interest, and any limitations - provided before or at the time advice is given.

Suitability documentation: record client objectives, financial situation, risk profile, products considered, and reasons for the recommendation; retain for at least seven years.

Record-keeping: keep client files, advice records, disclosure records, and complaints for a minimum of seven years; records must be retrievable and legible.

Privacy Act 2020: collect only necessary information, store securely, allow access and correction, and notify breaches likely to cause serious harm.

Complaints handling: maintain an internal complaints process, acknowledge promptly, investigate, and inform clients of the right to escalate to the dispute resolution scheme.

Advertising and marketing must be fair, clear and not misleading; past performance claims require a warning that past performance is not a reliable indicator of future results.