It is important to remember that if your circumstances change, call or get in touch with the lender, and let them know you are having trouble making your repayments. If you fail to meet your payment commitments or breach the credit contract in some other way, the lender may be able to repossess goods that you bought on hire purchase or that you put up as security for a loan (see “Repossession” in this chapter).

Note: If you’re not able to meet your payment commitments, you may be able to negotiate another arrangement with the lender – for example, making smaller payments over a longer period. If the debt is unsecured, you may be able to apply for a debt repayment order to enable you to pay the debt back over time and to stop the lender taking court action against you (see “When you can’t pay your debts: Bankruptcy and other options” in this chapter).

Credit Contracts and Consumer Finance Act 2003, ss 55, 56, 57A(3)(a), 59A

You can ask the lender to change the terms of the credit contract if:

• you’re unable to meet your obligations because of some unforeseen hardship, and
• you can reasonably expect to meet your obligations if the lender changes the contract terms.

Examples of unforeseen hardship are if you’re sick or injured, if you’ve lost your job or if your marriage or relationship has ended.

Changes to the contract can include extending the term of the contract (to reduce the amount of each payment) and postponing certain payments. Interest will continue to run if you extend the term of the contract.

You’ll need to put your request in writing. The lender can’t charge you a fee for dealing with your request.

Credit Contracts and Consumer Finance Act 2003, s 57; Credit Contracts and Consumer Finance Act 2003, s 55(1B)

In some cases when you’ve already missed a payment, the lender doesn’t have to consider any hardship request you make. This applies if:

• you’ve been behind on your payments for two months or more, or
• four times in a row you’ve failed to make your payments on time, or
• you’re behind two weeks or more after getting a repossession warning notice (see “Repossession” in this chapter).

However, even in those cases the lender must consider your hardship request if you’ve now fixed the problem.

The lender also doesn’t have to consider your request if you could reasonably have been expected to foresee, when you made the contract, that the hardship would prevent you making your payments.

There’s also a restriction on how often you can make hardship requests on the same grounds. If you’ve already made a hardship request to the lender, you can’t make another one within the next four months unless it’s for a different reason.

Credit Contracts and Consumer Finance Act 2003, s 57A

After they receive your written hardship request, the lender must meet a number of deadlines:

• They have to give you a written notice acknowledging your request within five working days after receiving it.
• If they want more information from you, they have to ask for this within 10 working days after your request.
• The lender must make a decision and notify you of it within 20 working days after your request (or, if they’ve asked for more information, then within 10 working days after getting the information or within 20 working days after asking for the information, whichever is later). The lender must comply with the lender responsibility principles when they decide (see “Responsible lending requirements” in this section). If they refuse your request, they have to give you written reasons for this and must tell you about your right to take the issue to the courts or the Disputes Tribunal.

If the lender refuses your request, you can ask the courts or the Disputes Tribunal to change the terms of the contract (see the chapter, “The Disputes Tribunal”).

You can also take your request to the courts or Disputes Tribunal if the lender does not respond with a decision within the required time (see above).

You can also complain to the lenders dispute resolution scheme if you disagree with the lender’s decision to decline your application for hardship. See “Dispute resolution schemes” in this section.

Credit Contracts and Consumer Finance Act 2003, ss 49–54

A lender must accept early or extra payments (also called “part prepayments”) unless the contract says that the lender can refuse them. If a lender refuses an early payment, they must refund that payment to you as soon as practicable.

A lender must accept full repayment at any time, and the contract can’t prevent this.

Note: The lender can charge you a “break fee” if the contract specifically allows this. A break fee – called a “prepayment fee” in the CCCF Act – is a fee you pay if you pay off the credit early. The fee must be a reasonable estimate of the lender’s loss arising from the early payment (see also “Interest and fees” in this section).

If you’re considering early repayment, ask the lender what it will cost to repay early (they may charge you a small fee for working out the figures). Make sure you check whether it’s worth it to repay early. Getting budgeting advice will help.

You may be able to withdraw KiwiSaver funds early if you are experiencing significant financial hardship. To apply, contact your KiwiSaver scheme provider and fill out a form to make a hardship withdrawal (or contact Inland Revenue if you’ve been in KiwiSaver for less than two months). If your application is successful, you can only withdraw your contributions and your employer’s contributions. You generally cannot take out any government money that has gone into your KiwiSaver.

Significant hardship only applies when you cannot meet your minimum living expenses like food or shelter and should be considered as a last resort. There are strict criteria to successfully apply for significant hardship and people can generally only get support to meet their minimum living expenses. It is best to avoid applying for an early release of your KiwiSaver funds if you can because you miss out on more money down the loan.

The MoneyTalks helpline (0800 345 123) gives you access to free financial mentoring and budgeting support. If you are having problems making your repayments you can contact them anonymously via phone, livechat, email or text. You can talk about your options if you are having problems repaying your loan. For more information go to www.moneytalks.co.nz