As a result of the Supreme Court’s decision in Sportzone Motorcycles Limited (in liquidation) and Motor Trade Finances Ltd v Commerce Commission [2016] NZSC 53, the Commerce Commission has released an updated version of its draft guidelines for credit fees under the Credit Contracts and Consumer Finance Act 2003 (CCCFA).

The updated guidelines are designed to clarify how providers of consumer credit should approach the task of setting credit fees, and the limitations that apply to those fees.  In particular, the guidelines set out:

  • the general principles that lenders should take into account when applying credit fees;
  • guidance on the kinds of costs and losses that can and cannot be recovered through fees;
  • guidance on how the Commerce Commission will assess whether a credit fee is lawful or unlawful; and
  • the approach taken by the Commerce Commission on enforcing the credit fee provisions in the CCCFA.

The concept of “reasonableness” is central to the fees provisions.  Providers of consumer credit should take note that credit fees cannot be used to generate profit or to recover more than the costs permitted under the CCCFA.