NZ Level 5 Personal Lending flashcards

32 cards. Read the term and the definition here. The deck at the top of this page is optional.

CCCFA full name

Credit Contracts and Consumer Finance Act 2003 - the primary New Zealand statute governing consumer credit contracts, disclosure, fees, hardship and repossession.

Lender responsibility principles

Section 9C CCCFA duties requiring lenders to act with care, diligence and skill in advertising, before entering agreements, and when dealing with changes, hardship and enforcement.

Consumer credit contract

A credit contract where the debtor is a natural person and credit is provided predominantly for personal, domestic or household purposes, triggering CCCFA protections.

FSPR registration

The Financial Service Providers Register; lenders and advisers must be registered and belong to an approved dispute resolution scheme under the FSP Act 2008.

AML/CFT record retention

Under the AML/CFT Act 2009, customer due diligence and transaction records must be kept for at least five years after the business relationship ends.

Initial disclosure timing

Initial disclosure must be given before the consumer credit contract is entered into and includes credit limit, interest rate, fees, repayment terms and cancellation rights.

Cancellation period

The debtor may cancel a consumer credit contract within three working days of receiving initial disclosure, or five working days of entering the contract, whichever is later.

Continuing disclosure

Lenders must provide variation disclosure within five working days of a change and annual continuing disclosure for revolving credit, plus disclosure on request.

Unreasonable fees test

CCCFA s 41-44: a fee is unreasonable if it exceeds the lender's actual costs plus a reasonable profit margin, considering the nature of the service.

Affordability assessment

A pre-contract assessment verifying income and expenses to determine whether the borrower can repay without substantial hardship, including buffers for rate rises.

Revolving credit minimum payment

Credit cards and revolving facilities typically require a minimum monthly payment of 2-5% of the outstanding balance; interest accrues daily on the balance.

Debt consolidation effect

Combining multiple debts into one loan can lower repayments by extending term, but often increases total interest paid over the life of the loan.

BNPL characteristics

Buy-now-pay-later provides short instalment schedules funded by merchants, with low or no interest but late fees; many providers now fall under CCCFA affordability rules.

Guarantor disclosure

A guarantor must receive a copy of the guarantee and credit contract, be advised to seek independent legal advice, and receive CCCFA pre-contract disclosure.

Secured versus unsecured

Secured loans are backed by an asset such as a vehicle or property, attracting lower rates but repossession risk; unsecured loans carry higher rates.

Income verification sources

Payslips, 90 days of bank statements, IRD income summaries and employer letters verify PAYE income; self-employed income is verified via financial statements or IRD records.

Credit bureau signals

Defaults, judgments, insolvency, high enquiry volume and missed payments are negative credit signals that trigger policy review or decline in lending decisions.

Stress testing

Assessing repayment capacity at a higher interest rate, typically plus 2% or the lender's test rate, and under reduced-income scenarios such as parental leave.

Debt servicing ratio

Total debt repayments divided by gross income; many lenders apply a policy cap around 40-50%, though thresholds vary by lender and product.

PPSR registration

The Personal Property Securities Register records security interests over goods such as vehicles; registration perfects the lender's interest and should occur promptly after signing.

Joint and several liability

Where two or more borrowers are jointly and severally liable, each is responsible for the full debt, and the lender may pursue any one of them.

Fixed-rate break fee

An early repayment adjustment charged when a fixed-rate loan is repaid early, reflecting the lender's cost of replacing the funding; must be disclosed pre-contract.

Loan-to-value ratio

The loan amount divided by the asset's value; LVR caps vary by lender policy and whether the loan is owner-occupied or for investment.

Hardship grounds

Illness, injury, loss of employment, end of a relationship or other reasonable cause; the lender must consider varying the contract and respond within a reasonable time.

Repossession court order

A lender generally needs a court order to repossess secured goods unless the debtor voluntarily surrenders them; notices and a post-repossession statement are mandatory.

Limitation period for debt

Under the Limitation Act 2010, debts are generally recoverable for six years from the date of default, unless the debtor acknowledges the debt and restarts the period.

Dispute resolution scheme

An approved scheme such as the Banking Ombudsman or Financial Services Complaints Ltd that hears consumer disputes after the lender's internal complaints process.

Vulnerable customer indicators

Signs such as financial difficulty, illness, bereavement, family violence or limited literacy require adjusted communication and possible referral to support services.

Conflicts of interest

Situations where commission, sales targets or relationships could bias advice; these must be avoided, disclosed and managed in the client's interest.

Privacy Act 2020

Governs collection, use, storage and disclosure of personal information; requires consent for credit checks, secure storage, access and correction rights, and breach notification.

FAP licensing

Financial advice providers must hold a licence under the Financial Markets Conduct Act 2013, with individual advisers operating under that licence and its duties.

Advice record retention

Client files, suitability assessments, disclosure records and complaints must be retained for at least seven years and be retrievable and legible.