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Revised Responsible Lending Code issued

June 12, 2017

Contacts

Partners Andrew Harkness, Anne Callinan, Josh Cairns

Financial services regulation

A revised version of the Responsible Lending Code (first issued on 17 March 2015) was released on  6 June 2017. It comes onto effect on 6 July 2017.

The revisions relate to the Code's "Fees" section, which now reflects key decisions made by the Supreme Court in Commerce Commission v Sportzone/MTF [2016] NZSC 53.  The fees guidance has been amended as follows:

  1. The Supreme Court judgment in Sportzone is the authoritative statement on the costs a lender can recover through fees (insofar as the CCCFA wording that the Supreme Court considered remains unchanged).
  2. When a lender imposes a fee for a credit contract, the lender should recover only costs that relate to that specific credit contract or that class of credit contract. Those costs should be sufficiently close and relevant to the steps in the lending process to which the fee relates that they can reasonably be said to be incurred in relation to those steps.  
  3. A lender can average the relevant costs across a class of credit contracts, but if a lender does so it should use a representative sample of transactions.
  4. In setting an establishment fee, in particular, a lender should identify and separately cost each task it undertakes n order to establish the credit contract or that class of consumer credit contract.

The revised Code is available here.

For more details, contact Andrew Harkness or Anne Callinan (in Auckland) or Josh Cairns (in Wellington).