The Code gives lenders guidance on how to implement the new obligations set out in the Credit Contracts and Consumer Finance Act (CCCFA).
But Commerce and Consumer Affairs Minister Jacqui Dean has announced that the fees section of the Code has now been updated.
She said that when the Code was first introduced in 2015 the courts were considering a case relating to credit contract fees.
“Because of this, the fees section of the Code could not deal with matters at the centre of the decision.”
That case was the precedent setting Motor Trade Finance Ltd case, which took 10 years to wend its way through the courts.
Last year the Supreme Court overturned MTF’s final appeal and ruled in favour of the Commerce Commission.
At the time, Commerce Commission general counsel Mary-Anne Borrowdale said the Supreme Court had set down a definitive ruling on the approach lenders should take to the charging of fees.
"The Supreme Court has made clear that credit fees should only cover costs that are closely related to the particular loan transaction.”
The newly announced changed to the Code reflect those key decisions on credit fees made by the Supreme Court, Dean said.
“The Code aims to increase protection for people taking out loans without imposing unnecessary compliance costs on lenders who already have good systems in place.
“It has an important role in providing lenders with guidance on how to comply with their obligations.”
The updated Responsible Lending Code will come into effect on 6 July. It can be read here.
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