Getting a Fair Deal? The Commerce Commission’s Enforcement of Lender Responsibility Principles

Abstract

The lender responsibility principles were introduced into the Credit Contracts and Consumer Finance Act in 2015 and were intended to protect consumers from the conduct of unscrupulous lenders when entering into credit contracts. Under the CCCFA, the principles are enforced by the Commerce Commission. However, financial mentors have raised three main concerns regarding the Commission’s enforcement process. They are a lack of clarity around the law, the timeliness of investigations and enforcement actions and a lack of transparency in the process. This paper analyses the validity of these concerns and argues that the main issue in this process is the length of the investigations. On average, these investigations take 654 days and, during this time, lenders can continue to breach the principles as there are no interim protections for consumers. Reducing the time required for investigations is an important way to reduce harm within this sector. However, there are practical limitations on the ability of the Commerce Commission to investigate quickly. Therefore, this paper argues that complementary interim protections should be considered so that unscrupulous lenders have less ability to take advantage of consumers whilst under investigation. A potential option suggested is the creation of a warning system that notifies the public of any lenders under investigation and requires lenders to disclose this. By making potential consumers aware of the risks, this could reduce harm in this sector and further the purposes of the lender responsibility principles.