If things go wrong
Enforcing the credit contract laws against lenders
What action can borrowers take against lenders?
Credit Contracts and Consumer Finance Act 2003, ss 85–87, 93, 94; District Court Act 2016, s 74
You can take civil court action against a lender if you think they’ve breached the CCCF Act:
- The Disputes Tribunal can deal with a wide range of breaches under the Act, but only if the value of credit is under $30,000 (see the chapter “The Disputes Tribunal”).
- The District Court will hear claims from $30,000 up to $350,000.
- The case must go to the High Court if the amount of credit is above $350,000, or if you want to apply for an injunction to stop the lender doing something.
The Commerce Commission can also bring civil court action against lenders. However, contacting the lender and going through a dispute resolution scheme can often be the least time consuming way to resolve your specific complaint. It’s always best to start there.
What can the courts do about lenders who break the rules?
Credit Contracts and Consumer Finance Act 2003, ss 93–102; Credit Contracts and Consumer Finance Act 2003, ss 88–92; Credit Contracts and Consumer Finance Act 2003, ss 103(4), 108–110
The courts and the Disputes Tribunal have wide powers when a lender has breached the CCCF Act, including the Act’s repossession rules. These powers include ordering the lender to refund you money you’ve paid, or to pay you compensation for any loss or damage you’ve suffered, and generally making any other order that the court or the Tribunal thinks is appropriate. A lender who has acted in a particularly shocking way can also be ordered to pay you “exemplary damages” – these are damages that go beyond compensating you for any loss or damage and are aimed instead at punishing the lender.
If it’s a case where “statutory damages” apply (see below), you won’t also be awarded compensation unless the statutory damages aren’t enough to cover the loss or damage you suffered.
The High Court can also make injunctions to stop the lender doing certain kinds of things.
For some breaches, a lender will be required to pay “statutory damages”, which can be up to $6,000. These include breaches such as failing to give you key information, using incorrect interest calculations, or breaching the rules for repossessing goods. These penalties apply regardless of the loss you actually suffered and are designed to punish the lender.
The District Court can also ban lenders from operating a credit business if:
- they’ve repeatedly breached the CCCF Act (which can include breaching the lender responsibility principles), or
- they’ve been convicted of an offence against the Act or a dishonesty offence such as theft, or
- they’ve had a credit contract reopened by the courts or a Disputes Tribunal on the ground that it was oppressive or that the lender acted oppressively (see “Challenging an unfair credit contract” in this section).
The ban can be indefinite or for a specific period.
If the lender breaches the ban by operating a credit business, they can be jailed for up to three months or fined up to $200,000, or both.
What happens if a lender commits offences against the CCCF Act?
Credit Contracts and Consumer Finance Act 2003, ss 95, 102A-105F, 111; Credit Contracts and Consumer Finance (Infringement Offences) Regulations 2015, reg 4
The Commerce Commission can take action against lenders who commit the following kinds of offences against the CCCF Act:
- Infringement offences – This is a set of less serious offences, for which the Commerce Commission can issue a lender with an infringement notice and a fine (similar to a speeding ticket). These offences include, for example, leaving out some of the required information from a disclosure statement given to a borrower or not giving the disclosure statement within the required time. Infringement notices carry a fine of $1,000. If, in a particular case, the Commission thinks a more serious response is needed, it can bring a criminal prosecution in court for the infringement offence. In these cases, the maximum penalty is a fine of up to $10,000 for individuals and up to $30,000 for companies.
- Other offences – For other, more serious, offences against the CCCF Act, the Commerce Commission can bring criminal prosecutions. For these serious offences, the penalties are much heavier if the lender is convicted – a fine of up to $200,000 for individuals or up to $600,000 for companies. If a lender has been banned by the courts from operating a lending business because they offended repeatedly, and they then breach the order, they can be jailed for up to three months or fined up to $200,000, or both.