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Credit Contracts and Consumer Finance Act (CCCFA) basics

Key Takeaway

New Zealand consumer law is governed by key Acts. The Credit Contracts and Consumer Finance Act 2003 sets out responsible lending and disclosure rules. The Consumer Guarantees Act 1993 provides guarantees for goods and services. The Fair Trading Act 1986 prohibits misleading conduct and false representations in trade. These laws protect consumers and ensure fair practices.

New Zealand Consumer Law: CCCFA, CGA, and FTA Basics

New Zealand's consumer protection framework is primarily established by three key pieces of legislation: the Credit Contracts and Consumer Finance Act 2003 (CCCFA), the Consumer Guarantees Act 1993 (CGA), and the Fair Trading Act 1986 (FTA). These Acts aim to ensure fair dealings, transparent information, and remedies for consumers in their interactions with businesses and lenders.

Credit Contracts and Consumer Finance Act 2003 (CCCFA)

The Credit Contracts and Consumer Finance Act 2003 (CCCFA) governs credit contracts, which are agreements where credit is provided, such as loans, credit cards, and hire purchase agreements [Source: Credit Contracts and Consumer Finance Act 2003, s 4]. The primary purpose of the CCCFA is to promote a fair, efficient, and transparent credit market, and to protect the interests of consumers [Source: Credit Contracts and Consumer Finance Act 2003, s 3].

Lender Obligations

Lenders, including banks, finance companies, and other credit providers, have specific obligations under the CCCFA:

  • Responsible Lending: Lenders must comply with responsible lending principles. This includes making reasonable inquiries to ensure the borrower can afford the loan without substantial hardship, that the loan is likely to meet the borrower's needs and objectives, and exercising care, diligence, and skill [Source: Credit Contracts and Consumer Finance Act 2003, s 9C]. Lenders must also assist borrowers to reach an informed decision [Source: Credit Contracts and Consumer Finance Act 2003, s 9E].
  • Disclosure: Lenders must provide clear and accurate information about the credit contract. This includes initial disclosure (key information at the start of the loan, such as the annual interest rate, total interest charges, credit limit, and fees), continuing disclosure (regular statements), and full prepayment disclosure (information if a borrower wishes to repay the loan early) [Source: Credit Contracts and Consumer Finance Act 2003, Part 2, Subpart 2].

Borrower Rights

Borrowers have certain rights under the CCCFA, including:

  • Information: The right to receive clear and timely information about their loan [Source: Credit Contracts and Consumer Finance Act 2003, Part 2].
  • Hardship Applications: A borrower suffering unforeseen hardship (e.g., illness, injury, loss of employment, or disruption to income) may apply to the lender to vary the terms of their credit contract [Source: Credit Contracts and Consumer Finance Act 2003, s 55]. This might involve extending the loan term, reducing repayment amounts, or extending the period over which payments are made.

Consumer Guarantees Act 1993 (CGA)

The Consumer Guarantees Act 1993 (CGA) provides a set of automatic guarantees for consumers when they buy goods (personal property, such as electronics or clothing) or services (work performed for a person, such as repairs or professional advice) from a supplier (a person who is in the business of supplying goods or services) [Source: Consumer Guarantees Act 1993, s 2(1)]. These guarantees apply to goods or services ordinarily acquired for personal, domestic, or household use [Source: Consumer Guarantees Act 1993, s 2(1)].

Guarantees for Goods

When a consumer buys goods, the following guarantees apply:

  • Acceptable Quality: Goods must be fit for all the purposes for which goods of that type are commonly supplied, acceptable in appearance and finish, free from minor defects, safe, and durable [Source: Consumer Guarantees Act 1993, s 6].
  • Fit for Particular Purpose: Goods must be fit for any particular purpose that the consumer makes known to the supplier before purchase [Source: Consumer Guarantees Act 1993, s 7].
  • Match Description: Goods must match any description given by the supplier [Source: Consumer Guarantees Act 1993, s 8].
  • Match Sample or Demonstration Model: If goods are supplied by reference to a sample or demonstration model, they must correspond with that sample or model [Source: Consumer Guarantees Act 1993, s 9].
  • Reasonable Price: If the price is not agreed upon, the consumer is not liable to pay more than a reasonable price [Source: Consumer Guarantees Act 1993, s 10].
  • Repairs and Spare Parts: Manufacturers and importers guarantee that facilities for repair and spare parts are reasonably available for a reasonable period, unless the consumer is notified otherwise before purchase [Source: Consumer Guarantees Act 1993, s 12].

Guarantees for Services

When a consumer buys services, the following guarantees apply:

  • Reasonable Care and Skill: Services must be carried out with reasonable care and skill [Source: Consumer Guarantees Act 1993, s 28].
  • Fit for Particular Purpose: Services, and any product resulting from the services, must be fit for any particular purpose that the consumer makes known to the supplier [Source: Consumer Guarantees Act 1993, s 29].
  • Completed within a Reasonable Time: If no time for completion is agreed upon, the services must be completed within a reasonable time [Source: Consumer Guarantees Act 1993, s 30].
  • Reasonable Price: If the price is not agreed upon, the consumer is not liable to pay more than a reasonable price [Source: Consumer Guarantees Act 1993, s 31].

Remedies for Breaches

If goods or services fail to meet a guarantee, the consumer is entitled to remedies. For minor failures, the supplier may choose to repair, replace, or refund. If the supplier fails to remedy the problem, the consumer may reject the goods or cancel the service and obtain a refund or compensation. For major failures, the consumer can choose to reject the goods, cancel the service, or obtain compensation for any reduction in value [Source: Consumer Guarantees Act 1993, ss 18, 32].

Fair Trading Act 1986 (FTA)

The Fair Trading Act 1986 (FTA) prohibits certain conduct and practices in trade, which includes any business, profession, or calling of any kind [Source: Fair Trading Act 1986, s 2(1)]. Its purpose is to protect consumers from misleading and deceptive conduct and to promote fair competition [Source: Fair Trading Act 1986, s 1A].

Prohibited Conduct

Key prohibitions under the FTA include:

  • Misleading or Deceptive Conduct: A person must not, in trade, engage in conduct that is misleading or deceptive or is likely to mislead or deceive [Source: Fair Trading Act 1986, s 9]. This is a broad prohibition covering many types of commercial behaviour.
  • False Representations: A person must not, in trade, make false or misleading representations concerning goods or services. This includes misrepresenting the quality, standard, history, price, or endorsement of goods or services [Source: Fair Trading Act 1986, s 13].
  • Unsubstantiated Representations: A person must not, in trade, make a representation about goods or services without having reasonable grounds for making it [Source: Fair Trading Act 1986, s 12A]. This means businesses must be able to back up their claims with evidence.
  • Unfair Practices: The FTA also prohibits specific unfair practices, such as bait advertising (advertising goods or services at a bargain price with no reasonable prospect of supplying them) [Source: Fair Trading Act 1986, s 18], or offering gifts and prizes with no intention of providing them [Source: Fair Trading Act 1986, s 17].

Enforcement

The Commerce Commission is responsible for enforcing the Fair Trading Act. It can investigate alleged breaches, issue warnings, and take legal action through the courts, which can result in fines and other penalties for businesses that breach the Act [Source: Fair Trading Act 1986, Part 4]. Consumers may also be able to take private action in certain circumstances.

Contracting Out

Businesses generally cannot contract out of (exclude or limit) their obligations under the CGA or FTA when dealing with consumers. Any term in a contract that attempts to do so is likely to be unenforceable [Source: Consumer Guarantees Act 1993, s 43; Fair Trading Act 1986, s 5C (for consumer contracts)].

When to Seek Independent Legal Advice

When a consumer believes their rights have been breached under the Credit Contracts and Consumer Finance Act, Consumer Guarantees Act, or Fair Trading Act, or if they are unsure about their obligations, it is recommended that independent legal advice be sought immediately. Further information and assistance can be obtained from official government bodies such as the Commerce Commission or the Ministry of Business, Innovation & Employment. Community Law Centres throughout New Zealand also provide free legal advice and assistance: Community Law Centres.

Key Resources