Lender website review highlights issues consumers face when borrowing money

The Commerce Commission has today released the findings of its review of 215 selected lenders’ websites for compliance with disclosure rules.

The review looked at whether this group of lenders were likely to be complying with their responsibilities under the Credit Contracts and Consumer Finance Act (CCCF Act) to display key information prominently and clearly on their websites such as contract details, interest rates, and fees. It was also intended to gather information about lenders’ published interest rates and fees to inform the Commission’s programme of credit work.

Undertaken between May and December 2017, the review covered:

  • Whether the lender had published its standard form contract terms and costs of borrowing clearly and prominently as required under the law
  • What the lender had represented about the borrower’s right to cancel the contract
  • The number of fees charged, their names and the amount charged
  • The published interest rate for each lender.

“Our review has shown that 46 or 21% of the lenders included in the review potentially failed to comply with one or more of their obligations to clearly and prominently display costs of borrowing, standard form contract terms and accurately represent a borrower’s cancellation rights,” Commissioner Anna Rawlings said.

“Failure to disclose this information breaches the CCCF Act and deprives consumers of information that would assist them to make informed credit choices. We contacted all of the lenders covered by the review to remind them of their responsibilities. While most lenders have shown a willingness to make changes, we will be checking back later in the year and will consider further action if they have failed to comply.”

The CCCF Act does not cap interest rates, prescribe how lenders should name fees or impose a limit on the number of fees a lender may apply.

“We observed significant variation in interest rates and fees. The review found interest rates ranging from no interest at all, all the way through to 803% per annum. We also found more than 500 names used for fees ranging from $5 to $5,000,” Ms Rawlings said.

“Overall, this review provides a good insight into the information being provided to consumers and some of the difficulties consumers may face in trying to access and understand the true costs of borrowing, comparing lenders, and making informed borrowing decisions.”

The report can be found here.


Lenders covered by the review
The lenders covered by the review were compiled from a range of sources. This includes Commission enforcement registers and complaints data and lenders registered on the Financial Services Providers Register as providing consumer credit contracts. We removed lenders from the list where we identified that they did not have websites, were not engaged in consumer lending, or had been removed from the Companies Register. Major banks were not included in the group of lenders under review. They are the subject of a separate review of bank websites.

Broader Commission work in the consumer credit area
The Commission works closely with the Community Budgeting Advisory Sector to identify and report irresponsible lending practices through its Red Flags initiative.

The Commission has a series of animated videos called It’s All Good to help empower borrowers to make informed borrowing decisions and to teach broader consumer rights. The videos can be found athttp://tv.comcom.govt.nz/videos/.

Under the CCCF Act, the Commission can seek an injunction through the Courts if a lender does not comply with their website disclosure obligations. Failure to comply with other aspects of the CCCF Act can result in prosecution and fines of up to $600,000 per offence.

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