If you’ve applied for a loan lately, or even thought about doing it, you might have come across references to the CCCFA. But do you know what those letters stand for, or what they might mean for you?
The CCCFA, or Credit Contracts and Consumer Finance Act, is the main piece of legislation that New Zealand has in place to protect borrowers. It applies to personal loans, car loans, home loans, credit cards and other types of borrowing, so it can affect anyone in New Zealand who’s taking out a consumer loan (not for business purposes).
Part of what it does is to require that lenders don’t approve loans that borrowers can’t demonstrate they can pay back. Although that can sometimes mean borrowers conduct affordability checks that might feel like a bit of a hurdle on your path to getting a loan, it’s a really important tool to stop people getting into lending trouble.
Here’s what you need to know about the CCCFA, what your lender needs to do and what you can expect through the borrowing process.
What Is the CCCFA?
The Credit Contracts and Consumer Finance Act (CCCFA) is the New Zealand law that regulates consumer credit. That can be anything from home loans to credit cards, and other types of borrowing that households might do. It’s regulated by the Financial Markets Authority.
The Act sets out rules that lenders have to follow when they’re issuing credit to borrowers, and the rights that borrowers have while they’re paying back their loans. It’s designed to ensure lenders are acting responsibly, give borrowers clear and accurate information about any loans they take on, and give borrowers remedies to help if something goes wrong.
The CCCFA sets out what information lenders need to provide you, puts limits around fees and interest charges, and requires lenders to consider applications for help from borrowers who find themselves in unexpected hardship.
What does the CCCFA cover?
The CCCFA applies in lots of situations where households might borrow money. It covers personal loans, car finance and other vehicle loans, home loans, credit cards and overdrafts, store purchase and hire purchase agreements. It applies in a more limited way to buy-now-pay-later lending.
What doesn’t it cover?
The CCCFA doesn’t apply to every lending situation. It doesn’t affect business and commercial lending, because it’s designed to protect consumers rather than companies, and it doesn’t cover any informal loans that friends or family might make to each other if the lender isn’t in the business of lending.
Why did New Zealand introduce the CCCFA?
The CCCFA has been amended several times over its life, but it was introduced to help protect borrowers from unfair lending practices.
Then-acting Commerce Minister Judith Tizard said, in 2005, shortly before it first came into effect: “The new credit law provides greater protection for consumers from unfair practices by replacing outdated legislation that fitted awkwardly with many new credit products and industry practices.”
It is also designed to require lenders to be transparent about the cost of borrowing, prevent irresponsible lending that could lead to financial hardship, ensure borrowers understand the costs and terms involved before they sign a loan agreement and, overall, reduce the risk that consumers might take on debt that is not suitable for them.
What your lender has to tell you before you sign
A key part of the CCCFA is the disclosure that your lender has to make to you before you take out a loan, which is designed to make sure you have a really clear picture of what you’re agreeing to. Your lender will give you a written disclosure statement.
Your lender must provide a written disclosure statement before you sign.
It should include:
● The interest rate
● Every fee and charge
● Your repayment schedule
● The total cost of the loan (the total amount to be repaid)
● Default interest and what happens if you miss a repayment
● Your cancellation rights
● Early repayment rules
● The lender's contact details
● The dispute resolution scheme the lender belongs to
If your lender hasn't provided a disclosure statement, ask for one before signing anything.
But your lender’s obligations don’t finish after you’ve signed your loan agreement and received the money. They need to provide you with ongoing account statements, so you can see what you owe, notify you clearly of any interest rate changes that might affect what you’re paying, and confirm any changes to your loan agreement in writing.
Why might your lender want to see your bank statements?
Under the CCCFA, lenders have an obligation to ensure you’re not borrowing more than you can afford. To do this, they might look at your bank statements to see how you’re currently managing your money and how your new loan repayments might fit in.
They can’t just rely on your assurances about your financial position; they need to verify it for themselves.
When they’re looking at your bank statements, lenders will be looking at things like your income, your regular living expenses, your debts and financial commitments and whether you have space for more. You might have seen coverage a while ago of people being rejected because of trips to Kmart or dog expenses, but amendments have been made to the rules to address the issues that caused problems for lenders.
The CCCFA gives you other rights
There are other important things to know about the CCCFA.
You can cancel shortly after signing up for a loan
You might not realise it, but the CCCFA gives you the power to change your mind. Even when you’ve agreed to a loan, you have a short period to cancel it. This starts when you receive the disclosure statement from the lender. How long you have depends on how you received that disclosure statement. If it was in person, you have five days. If you received it by email or in the post, you’ll have longer.
If you have changed your mind about borrowing and decide to cancel, you need to notify your lender in writing and keep a copy of this yourself. You’ll also need to return all money, goods or property that you received as part of the agreement and you may need to cover any reasonable costs that the lender incurred in the process.
Lenders are all required to be members of external dispute resolution schemes, and if you’re not happy with the way a cancellation request is handled, you can complain to the scheme your lender is part of. The schemes deal with complaints that cannot be resolved directly, so you’ll need to raise a complaint with your lender first, and work through their complaints processes.
You can repay your loan early
The CCCFA also requires that borrowers are able to pay their loans back early, either fully or in part. You can be charged an early repayment fee, but this needs to reasonably reflect the costs the lender incurs; it can’t just be a penalty. If you’re thinking about paying off a loan early, or making a lump sum payment, it’s often a good idea to ask for a written indication from your lender of how much you are likely to be charged to do so.
Fees have to be fair
This is an important one. Lenders can only charge fees that are reasonable and actually reflect their cost of doing business. Interest costs are dealt with separately, and there is more leeway on what can be charged in interest, although there are still caps on the maximum interest rate that can be applied in payday lending situations. If a lender doesn’t charge any other fees, the maximum interest rate for those agreements is 0.8 percent a day.
When you’re looking at what a loan will cost you, it’s important to look at the total cost of borrowing rather than just the advertised interest rate. Other fees and charges can add to what you have to pay for your loan.
Oppressive conduct is prohibited
Lenders have to treat you fairly. Any behaviour that is harsh, unfair or unreasonable isn’t permitted under the CCCFA. That means lenders can’t pressure you to sign an agreement without giving you sufficient time to read it and receive proper disclosure. You can’t be charged unexpected fees that weren’t disclosed before you signed your loan agreement, or which are significantly higher than it costs the lender to lend you the money. Debt collectors can’t contact your employer without lawful authority, and can’t threaten you.
Common Misunderstandings About the CCCFA
New Zealand has had the CCCFA in effect for quite a while, but there are still some misunderstandings about how it works.
Myth: The CCCFA exists to stop people from getting loans.
Reality: It exists to ensure lending is responsible. Many borrowers are approved for finance every
day. The CCCFA is a layer of protection to make sure that you don’t borrow more than is affordable for you.
Myth: Buying coffee or takeaway meals means you'll automatically be declined.
Reality: Lenders assess your overall financial situation rather than judging individual purchases. A few indulgences won’t change the overall picture if you’re usually comfortably in control of your financial life.
Myth: The CCCFA only applies to mortgages.
Reality: It covers most forms of consumer credit, including personal loans, vehicle finance, credit cards, and many Buy Now Pay Later arrangements.
Myth: Once you've signed, you're locked into the loan.
Reality: Borrowers may have cancellation rights shortly after signing and can apply for financial hardship assistance if their circumstances change.
What if you can’t keep up with your repayments?
You might have your loan for several years, and life happens. You might find you’re facing unexpected financial difficulties that make it hard for you to repay your loan as you expected. The CCCFA provides protection for borrowers in this position.
It requires that lenders consider applications for hardship variations from borrowers who find their circumstances have changed unexpectedly due to illness or injury, redundancy, the end of a relationship or another unexpected event.
People in this situation can ask to extend their loan term, which reduces their repayments, temporarily postpone repayments, or some combination of both. Extending the loan term or putting payments on hold can mean you pay more interest on the loan overall, but may make it more manageable in the short term.
If you think you might need to apply for help, it’s important to do so as early as possible because the application needs to be made before arrears have become an issue. When you make your application in writing, lenders have to consider it and respond within a set timeframe of up to 20 working days for a final decision. Lenders have to explain any decision they make in writing.
If an application is declined, borrowers can complain to the lender’s dispute resolution scheme.
What if your car is at risk of repossession?
The CCCFA also sets out rules for situations where borrowers might have their cars repossessed. This is usually something that only happens when a loan is secured. For secured loans, like most car finance, the lender holds an asset as security and can sell it if the borrower does not make repayments.
Even with that agreement, though, the lender has to follow a legal repossession process, including providing adequate notice and giving the borrower time to remedy the default. Repossession agents also have legal requirements that determine when and how they can enter a property to claim the vehicle.
If a lender repossesses a vehicle and sells it for less than the borrower owes, there may be a loan balance still remaining. If you’re concerned about your ability to repay any loan, it’s always worth contacting the lender as soon as you possibly can.
What changed in 2021, 2024, and 2026?
The CCCFA has been through a number of changes in its life.
December 2021
In December 2021, responsible lending requirements became significantly more detailed and affordability assessments became more comprehensive. This was the period where there was significant news coverage about people being turned down for loans for what seemed to be relatively minor issues with their spending history. Lenders were working with very prescriptive rules that they said made it hard to apply their own judgements.
July 2024
The affordability assessment requirements were simplified significantly, which gave lenders more freedom in how they checked that loans were suitable. They still had to ensure that loans were affordable, but they could take a more practical approach.
July 2026
Since July 1, 2026, the Financial Markets Authority became the regulator responsible for enforcing the CCCFA, taking over from the Commerce Commission. Consumer lenders now have to be licensed by the FMA, but borrowers’ rights haven’t changed, and the protections remain the same.
What happens if a lender breaches the CCCFA?
If you think a lender has breached the CCCFA, your first step is probably to make a complaint directly to the lender. You’ll need to complain in writing and explain what happened and what outcome you want. You should try to keep copies of all your correspondence with the lender.
If you aren’t able to have your issue resolved, you may need to complain to the lender’s dispute resolution scheme. There are four available in New Zealand financial services – Financial Services Complaints Ltd (FSCL), the Insurance and Financial Services Ombudsman (IFSO), the Banking Ombudsman and the Financial Dispute Resolution Service (FDRS). The lender will need to tell you which scheme they are a member of.
The CCCFA is a great protection for borrowers in New Zealand. It means lenders have to give them clear information before any loan agreement is signed; they can’t be approved for a loan that’s unaffordable, and they need to be treated fairly throughout the process.
The CCCFA gives you important rights and protections if something goes wrong and it can be really helpful to ensure you understand these before you take out any form of consumer credit in New Zealand.
Frequently Asked Questions
Does the CCCFA apply to personal loans?
Yes, the CCCFA applies to personal loans as well as most other types of consumer credit arrangements.
Does the CCCFA cover mortgages?
Yes, it applies to home loans and lenders are required to check that home loan applicants can afford any loan they apply for.
Can a lender decline my application under the CCCFA?
Yes, if the lender is concerned the loan is not affordable or suitable, it can decline your application.
Why does my lender want to see my bank statements?
Lenders can’t take your word for it when it comes to your finances. Bank statements can be a good way to verify things like your income and spending habits.
What can I do if I can't afford my repayments?
Get in touch with your lender as soon as possible. There are ways that your lender may be able to help, but the sooner you act, the better.
Can my lender repossess my car?
If you’ve offered your car as security on a loan, the lender can take it and sell it if you don’t make your repayments.
How do I check whether a lender is legitimate?
Lenders should be listed on the Financial Services Providers Register. The FMA now has responsibility for consumer lending, so if you have concerns about a lender, you could also contact the authority for assistance.
Disclaimer: Please note that the content provided in this article is intended as an overview and as general information only. While care is taken to ensure accuracy and reliability, the information provided is subject to continuous change and may not reflect current developments or address your situation. Before making any decisions based on the information provided in this article, please use your discretion and seek independent guidance.
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