Credit contracts: Hire purchase, loans and other credit

Challenging an unfair credit contract

What can I do if the contract is unfair?

Credit Contracts and Consumer Finance Act 2003, ss 117-131

You can ask the Disputes Tribunal or the District Court to change the terms of a credit contract if you think it’s very unfair (the CCCF Act calls this “reopening” the contract). The terms can be changed if:

  • the contract is “oppressive”, which means it’s “harsh, unjustly burdensome, unconscionable, or in breach of reasonable standards of commercial practice”, or
  • the lender is exercising a right they have under the contract in an oppressive way – this includes, for example, refusing to change the terms of the contract or to agree to an early termination, or
  • the lender persuaded you to enter into the contract by acting in an oppressive way.

There are certain factors that the tribunal or the court has to consider, including:

  • the relative bargaining power of the two sides
  • whether your age or your physical or mental condition meant you weren’t reasonably able to protect your own interests
  • whether the lender complied with the lender responsibility principles (see “Responsible lending requirements” in this section)
  • whether the contract is written in clear, understandable language
  • the terms you could have obtained from other lenders
  • how much you have to pay under the contract
  • how long you were given to put right any default.

Usually, the court or tribunal won’t change a contract merely because, for example, a penalty interest rate is high. They will tend not to change your contract if you’re experienced and you clearly understood the contract. They’re more likely to change your contract if your understanding was limited in some way – for example, by not being able to speak or read English or by some disability.

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