An impressive 250 distinguished members of the community, financial and business organisations joined forces during a Financial Summit last August to consider ways of addressing irresponsible lending. Law reforms were considered necessary in a bid to prevent unscrupulous lenders preying on desperate borrowers who are often further disadvantaged as a consequence of borrowing. On 31 October 2011, calls for reform were agreed to by the Cabinet.
The principle of responsible lending will create a duty on lenders to take into account the circumstances of their customers and the effect the borrowing will have on their lives. The overall objective of responsible lending is to improve the standard of lending practices within the finance industry.
Proposed key changes to the CCCFA include:
Section 41 of the CCCFA currently provides that credit and default fees must not be unreasonable. The Bill in its current form would further define the term “credit fees” along with proposing a new test for unreasonableness. Separate tests are proposed for determining what will constitute unreasonable credit fees and default fees.
According to the former Consumer Affairs Minister, the terms of the Bill will result in “the biggest changes to consumer credit law in a decade.” It is anticipated that the new laws will come into force by mid-2013.