Credit Regulations Good For Consumers & Business
New Credit Regulations Good For Consumers & Business
New regulations will make it easier for credit providers and consumers to comply with the Credit Contracts and Consumer Finance Act 2003, says Consumer Affairs Minister Judith Tizard.
Under the Act, which comes into force on 1 April 2005, credit providers will be able to charge a reasonable fee to compensate them for any loss if a consumer repays a credit contract early. The amount charged by the creditor must be a reasonable estimate of the creditor's loss. The regulations set out a formula that credit providers can choose to use to calculate the reasonable estimate.
"The provisions dealing with early repayments provide a formula for calculating the mandatory rebate of the unused part of any consumer credit insurance premium, for example where a consumer repays a loan early."
Judith Tizard says the regulations provide greater transparency for both consumers and credit providers.
"Introducing fair and flexible rules about what credit providers can charge not only protects consumers from unreasonable charges, it also provide creditors with clarity on how they calculate those fees and interest charges.
"The regulations will help reduce business compliance costs, as credit providers can now access a clear formula to undertake calculations related to credit contracts.
The regulations also make available alternative ways for creditors to communicate any changes in the interest rate or fees to their customers.
The Act was passed by Parliament in October last year, giving businesses time to prepare their financial and business systems for when the Act comes into force in April next year.
The regulations are available on the Ministry of Consumer Affairs website: www.consumeraffairs.govt.nz