EXEMPTIONS TO CCCFA IN THE TIMES OF COVID-19 AND COMMERCE COMMISSION GUIDANCE
Posted by Richard Hatch on May 25 2020 in News
Covid-19 has had a serious impact on both lenders and borrowers. The Credit Contracts and Consumer Finance (exemptions for Covid-19) Amendment Regulations 2020 (Covid-19 regulations) will give faster implementation of assistance where the borrower has been impacted by the effects of Covid-19. The Commerce Commission has also developed guidance for lenders and borrowers during the pandemic which is applicable to consumer lending and does not apply to loans provided for businesses. This article serves to give a brief overview of the same.
Covid -19 Regulations
The regulations were passed on 31 March 2020 to amend the Credit Contracts and Consumer Finance Regulations 2004 and provide exemptions from Credit Contracts and Consumer Finance Act 2003 (CCCFA).
The exemptions as set out in the regulations apply only to registered banks, and all other lenders currently must comply with the requirements in the CCCFA.
The exemptions help facilitate the recently announced six-month mortgage repayment deferral scheme and relief from other household borrowing from registered banks and cope with the number of hardship applications. The exemptions facilitate variations of existing contracts and entry into replacement contracts entered before 31 October 2020 for the purpose of reducing those difficulties.
The exemptions apply if a registered bank is the creditor (or the contract manager, in the case of securitisations and other situations) and if the borrower is experiencing, or reasonably expects to experience, financial difficulties due to the economic or health effects of Covid-19.
Registered banks are exempt from certain requirements of the CCCFA and also from certain Responsible Lending Principles when a consumer credit contact (contract) is being varied or replaced in terms of making enquiries and being satisfied of the borrower’s ability to continue to make payments without suffering substantial hardship. Some of the examples of exemptions include changes to certain time limits for making disclosure and sending/giving terms to borrowers and exemptions for obligations in relation to hardship applications and will assist in dealing with the logistical challenges due to Covid-19.
However, the exemptions are subject to the condition that the registered bank must, as soon as is reasonably practicable, comply with its obligations such as make disclosure, give or send or give terms to borrowers and decide, in the case of a hardship application, by written notice whether to agree to change the contract. If the registered bank does not agree to change the contract in accordance with the hardship application then, written notice must be given setting out the reason for that decision and a clear summary of the borrower’s rights under section 58 of the CCCFA.
Commerce Commission of New Zealand Guidance (Guidance)
The Commerce Commission has prepared the Guidance for lenders and is intended to assist all lenders, registered banks (to the extent the Covid-19 regulations apply) and all non-bank lenders to apply the provision of the CCCFA during the period the New Zealand economy is affected by Covid-19 and should be read in conjunction with the CCCFA and Covid-19 regulations. It also provides additional guidance e.g. relating to the Lender Responsibility Principles and Responsible Lending Code; duties to assist and deal with borrowers experiencing financial stress; responsible advertising; disclosure and fees. The Guidance may be withdrawn or changed at any time.
The Guidance for borrowers sets out questions and answers to guide borrowers about their existing loan or if they are about to take out a new loan. It also provides organisations that are available to provide financial support packages.
Updates on the Guidance for lenders and borrowers can be accessed from https://comcom.govt.nz/
We are experienced in banking and finance transactions of all values for both lender and borrower clients so if you would like more information regarding the above, please contact us.
Richard Hatch | Partner
t +64 9 300 8761 | Richard.Hatch@shieffangland.co.nz
Neeru Kesry | Registered Legal Executive
t +64 9 300 8761 | Neeru.Kesry@shieffangland.co.nz
This paper gives a general overview of the topics covered and is not intended to be relied upon as legal advice.