NZ Level 5 Personal Lending key terms

New Zealand's main statute governing consumer credit. It sets rules for disclosure, responsible lending, fees, hardship and repossession, and applies to most personal loans made to individuals for personal or domestic use.

A regulation made under the CCCFA that prescribes how lenders must assess affordability, inquire into a borrower's needs and objectives, and avoid lending that is likely to cause substantial hardship. Breaches can attract penalties.

The core statutory duties requiring a lender to exercise care, diligence and skill, make reasonable inquiries, and ensure a loan is likely to be affordable and meets the borrower's needs and objectives before entering the agreement.

The process of calculating whether a borrower can meet loan repayments from verified income after meeting existing commitments and reasonable living expenses, both now and if interest rates or circumstances change.

Verified income remaining after deducting tax, existing debt commitments and reasonable living expenses. It indicates the maximum repayment a borrower can sustain and is central to the affordability calculation.

The minimum spending needed to maintain a modest standard of living, such as food, utilities, transport and insurance. Lenders must use reliable benchmarks or verified data rather than accepting unrealistically low declared figures.

The requirement to ask what the borrower wants the money for and what outcome they seek, so the recommended product, term and structure genuinely suit their purpose rather than simply maximising the loan.

An inquiry into a credit reporting agency's file, such as Equifax or Centrix, to review a borrower's repayment history, defaults, judgments and existing credit accounts before deciding whether to lend.

A record held by a credit reporting agency showing a person's credit accounts, repayment history, defaults, court judgments, insolvency and inquiry history. It informs both affordability and creditworthiness decisions.

A credit reporting regime where agencies hold detailed account data, including repayment history and credit limits, not just negative events. It allows lenders to assess conduct and existing exposure more accurately.

A credit check recorded on a file because a person applied for credit. Multiple hard inquiries in a short period can signal financial stress and may reduce a credit score.

Total debt divided by gross income, used as a quick indicator of leverage. A high ratio suggests limited capacity for further borrowing and prompts closer scrutiny of the affordability assessment.

The key information a lender must give a borrower before or at the time a consumer credit contract is entered, covering terms, fees, interest, cancellation rights and dispute resolution. It must be clear and accurate.

Ongoing disclosure obligations during the loan, such as notifying changes to interest rates, fees, payments or terms, and providing periodic statements so the borrower can track the balance and obligations.

Disclosure required when an existing credit contract is changed, for example a limit increase, term extension or rate change, so the borrower understands the effect of the variation before it takes effect.

A pre-prepared contract where the borrower has little or no ability to negotiate terms. Consumer credit law imposes extra fairness and disclosure requirements on such contracts.

Contract clauses that create a significant imbalance in rights, are not reasonably necessary to protect legitimate interests, and would cause detriment if enforced. Courts can declare them unenforceable.

A ground for relief where a lender has exercised a right or power in an oppressive, harsh or unfair manner, for example unreasonable enforcement conduct. The court may reopen the credit contract.

A situation where a borrower cannot reasonably meet repayments due to illness, injury, loss of employment, relationship breakdown or other reasonable cause. It triggers statutory hardship protections.

A formal request by a borrower in financial difficulty for a change to the loan, such as reduced payments, a payment holiday or an extended term. The lender must respond within set timeframes and consider reasonable options.

A temporary concession granted to a borrower in difficulty, such as deferring payments or accepting a lower amount for a period, while the underlying debt remains and is later restructured.

A failure to meet a loan obligation, such as missing a payment or breaching a condition. Default can trigger penalties, acceleration of the debt and enforcement action if not remedied.

The amount of overdue payments accumulated on an account. Persistent arrears are an early warning sign of financial difficulty and should prompt contact and options before enforcement.

A formal written notice telling a borrower that a default has occurred, what must be done to remedy it, and the deadline. Enforcement such as repossession generally cannot proceed until it is properly served.

A contract term allowing the lender to declare the whole outstanding balance immediately due on default, rather than only the missed instalments. Its use is constrained by consumer credit protections.

The lender's recovery of secured goods after default. Strict statutory rules govern notices, timing, sale of goods and accounting to the borrower for any surplus or shortfall.

A right over property that secures repayment of a loan, such as a mortgage over land or a security interest in a vehicle registered on the Personal Property Securities Register.

The statute creating a national register and priority rules for security interests in personal property. Lenders register to perfect their interest and protect priority against other creditors.

The public online register of security interests in goods such as vehicles and equipment. Searching it reveals existing claims, and registering a financing statement perfects the lender's interest.

The step of registering or otherwise protecting a security interest so it is enforceable against third parties and gains priority. Unperfected interests can be defeated by a later registered creditor or a buyer.

A promise by a third party to meet the borrower's obligations if the borrower does not. Guarantors must receive clear disclosure and should be warned to seek independent legal advice.

Advice from a lawyer acting for a guarantor or borrower, separate from the lender, confirming they understand the risks and obligations. It reduces the risk of the guarantee being challenged.

Changing the terms of an existing loan, such as extending the term, consolidating debts or switching repayment frequency, to make it sustainable while preserving the lender's recovery.

Replacing an existing loan with a new one, often with a different lender or product, to obtain a better rate, lower payments or release equity. It requires fresh disclosure and affordability checks.

Combining several debts into one loan, usually to simplify repayments or reduce the interest rate. It can extend the term and increase total interest, so suitability must be assessed carefully.

Choosing the loan type, term, rate structure and features that best fit the borrower's purpose and capacity, after comparing alternatives and documenting why the chosen option is appropriate.

Whether a recommended or approved product is appropriate for the borrower's needs, objectives and financial situation. It must be evidenced by the file, not merely asserted.

All charges a borrower pays for a loan, including establishment, administration, early repayment and default fees, plus interest. Fees must be disclosed and must not be unreasonable under the CCCFA.

A charge or adjustment applied when a borrower repays a fixed-rate loan early, reflecting the lender's loss from broken funding. It must be disclosed and calculated according to the contract.

An interest rate locked for a set period, giving predictable repayments regardless of market movements. Breaking the fixed term early may trigger an early repayment adjustment.

A variable rate that moves with market conditions, so repayments can rise or fall. Borrowers should be assessed for their ability to cope with rate increases.

An independent, approved scheme that handles complaints about lenders free of charge to consumers. Lenders must belong to one and tell borrowers how to access it.

The lender's own formal procedure for receiving, investigating and responding to complaints within set timeframes, which a borrower must generally use before escalating to an external scheme.

A situation where a person's own interests, such as commission or sales targets, could improperly influence advice or a lending decision. It must be identified, disclosed and managed.

Telling a client about any commission, incentive or soft dollar benefit received because of a loan or product they take, so they understand what may influence the recommendation.

The identity verification and due diligence process required under anti-money-laundering law, confirming who the borrower is, the source of funds and the nature of the relationship.

Laws and procedures requiring lenders to detect and report suspicious transactions, verify customers and keep records, reducing the risk of the business being used to launder criminal proceeds.

Maintaining complete, accurate and retrievable records of inquiries, assessments, advice and disclosures for the required retention period, so decisions can be evidenced and audited later.

A dated written record of a client conversation, decision or piece of evidence, capturing who said what and why a recommendation was made. It supports later review and dispute defence.

A recommendation or opinion about acquiring, holding or disposing of a financial product, including a loan. It triggers conduct, disclosure and competence obligations under the financial advice regime.

The obligation to tell a client, clearly and in writing, about any conflict that could affect the advice, including commissions, ownership ties or incentives, before the client acts.

A borrower whose circumstances, such as age, illness, disability, bereavement or language difficulty, reduce their ability to understand or act. Extra care, communication and support are required.

Acting with honesty, integrity and professionalism, putting the client's interests first, avoiding mis-selling, and treating borrowers fairly throughout the loan lifecycle.