Parliament

Gordon Campbell | Parliament TV | Parliament Today | Video | Questions Of the Day | Search

 

What Difference Will the Credit Reforms Make?

Case Studies - What Difference Will the Credit Reforms Make?

Case study 1

I borrowed $4000 from a small finance company and I have to pay a $1000 establishment fee and 11% interest. Other similar finance companies usually charge an establishment fee of $350 or less.

What difference will the reforms make? Under the new law, establishment fees must not exceed the cost of approving the application for credit, setting up and documenting the loan.

Case study 2

I bought a car on hire purchase and they have charged me $90 for a Motor Vehicle Security Registration fee, but I thought the cost of registering a motor vehicle security is only $11.

What difference will the reforms make? Under the new law a lender can pass on the cost of a fee it has paid to a third party, but it must be the actual amount paid to the third party.

Case study 3

I've borrowed $10,000 from a lender at 26% interest (no fees) payable over 3 years (monthly payment $402.91). My friend borrowed the same amount, also at 26% and also for one year, from another lender. After 12 payments he owes $7478.60 and I owe $7640.67. My contract says nothing about how interest is calculated.

What difference will the reforms make? In the above case, one lender has used the old Rule of 78 to calculate the balance. The new law prohibits lenders from using the Rule of 78 and from charging interest in advance. Interest must be calculated in relation to a daily balance. Lenders must also disclose in the contract their methods for calculating interest.

Case study 4

Lender J has never bothered to follow the Credit Contracts Act. He doesn't provide written contracts and carries out practices that might be considered oppressive eg taking the ATM cards of borrowers as security. Surely he is not fit and proper to be in the lending business?

What difference will the reforms make? Under the Credit Contracts Act people such as this can be banned from lending. However, the Act has no teeth and has never been put into action on this point. This is because no public agency has been empowered to enforce the law. This will change this if the Commerce Commission has the role of enforcing credit law.

Case study 5

A consumer borrowed $2,500. With finance charges, the amount to be repaid was $3,500 over three years. They decided to settle early and the settlement figure was $2,581.75. Two years later, they received a bill for $888, calculated as 24% on $2,581.75 – the problem was they forgot to pay the 75 cents but interest was charged on the $2,581.75.

What difference will the reforms make? Under the new law, if the lender accepts the early payment, they must provide credit in some form to the borrower. The term of the loan may be shortened, the size of the payments may be reduced, or payments may be deferred. However, lenders cannot simply apply the payment to the principal without reducing the “upfront” interest charge.

ENDS

© Scoop Media

 
 
 
Parliament Headlines | Politics Headlines | Regional Headlines

Gordon Campbell: On Labour Refusing To Lead A Progressive Drugs Policy

Once again, Labour has chosen not to use (a) its parliamentary majority and (b) the huge mandate it was given at the last election in order to (c) bring about progressive social change. Once again, Labour seems to regard its main purpose for being in power as being to keep National and Act out of power. Will Labour for instance, overhaul our out-dated, unsafe, and unjust laws on drugs? No, it will not... More>>

 

Agriculture: Government To Phase Out Live Exports By Sea

The Government has announced that the export of livestock by sea will cease following a transition period of up to two years, said Agriculture Minister Damien O’Connor. “At the heart of our decision is upholding New Zealand’s reputation for high ... More>>

ALSO:

Norman Gemmell: New Zealand’s New Housing Policy Is Really Just A New Tax Package — And It’s A Shambles

Norman Gemmell , Te Herenga Waka — Victoria University of Wellington Economists like to talk about “optimal policy instruments” — essentially, policies that achieve their objectives more effectively or efficiently than the alternatives, and ... More>>

Climate Change: Emissions Report Shows Urgent Action Needed

Every part of Government will need to take urgent action to bring down emissions, the Minister for Climate Change, James Shaw said today in response to the recent rise in New Zealand’s greenhouse emissions. The latest annual inventory of New ... More>>

ALSO:


Claire Breen: ACC’s Policy Of Not Covering Birth Injuries Is One More Sign The System Is Overdue For Reform

Claire Breen , University of Waikato Recent media coverage of women not being able to get treatment for birth injuries highlights yet another example of gender bias in healthcare in New Zealand. More>>

Police: Police Accept Findings Of IPCA Report Into Photographs Taken At Checkpoint

Police accept the findings of a report by the Independent Police Conduct Authority (IPCA) relating to photographs taken at a checkpoint in Northland. On November 16, 2019, Police set up a checkpoint down the road from a fight night event in Ruakaka ... More>>

ALSO:

Health: Drug-Testing Law To Be Made Permanent

Interim legislation that is already proving to keep people safer from drugs will be made permanent, Health Minister Andrew Little says. More>>

 
 
 
 
 
 

LATEST HEADLINES

  • PARLIAMENT
  • POLITICS
  • REGIONAL
 
 

InfoPages News Channels