The Responsible Lending Code in NZ, explained for car loan borrowers
The Responsible Lending Code is official guidance on how lenders meet their duties under the Credit Contracts and Consumer Finance Act (CCCFA). For a car loan it means a lender must ask about your income and spending and be satisfied you can repay without substantial hardship. It does not mean a lender must say yes, and nobody can promise approval.
The short answer
When you apply for a car loan in New Zealand, the lender is working under a set of legal duties. The most important is the affordability duty: before it lends, it must make reasonable inquiries and be satisfied that you are likely to make the repayments without suffering substantial hardship. The Responsible Lending Code explains how a lender can meet that duty in practice.
That is good news for borrowers, because it is designed to stop loans you cannot afford. It is also why the process feels like questions and paperwork. A lender that asks for three months of bank statements is not being difficult. It is doing what the law asks.
Fair Finance is a referral service, not a lender, not a broker and not a financial adviser. We do not apply the rules ourselves. Each lender on our panel does.
The law, the regulations and the Code
People mix up three things, so here they are apart.
- The Credit Contracts and Consumer Finance Act (CCCFA). The law. It sets the lender responsibility principles, disclosure rules, fee rules and penalties.
- Regulations. Detailed rules made under the Act. The prescriptive affordability regulations that began on 1 December 2021 were revoked from 31 July 2024. One regulation on high-cost consumer credit contracts stays in force.
- The Responsible Lending Code. Guidance prepared by MBIE. A revised version took effect on 31 July 2024, and its chapter 5 gives updated guidance on assessing affordability. The Code is not binding.
The change in 2024 gave lenders more flexibility in how they assess affordability. The duty to do it did not go away, and lenders must still keep records showing what inquiries they made and how they decided.
What a lender must do
According to Consumer Protection and the FMA, a lender has to:
- Understand what the loan is for, so it can offer the right type of credit.
- Check suitability and affordability. The credit must meet your needs, and you must be likely to repay without substantial hardship.
- Make reasonable inquiries that are enough to be satisfied of that. It can ask for income evidence and details of your expenses. Since 1 December 2021, a lender can no longer rely only on what the borrower says.
- Explain the contract and give written disclosure. This covers the total to repay, all fees, the security (for a car loan, the car), and what happens if you cannot pay.
- Charge reasonable fees. A default fee over $30 is presumed unreasonable unless the lender can show otherwise.
- Treat you fairly, including when you fall behind, and avoid oppressive conduct.
- Belong to a dispute resolution scheme and be registered or licensed as required.
- Keep records of the inquiries it made and be able to give them to you on request.
Sorted adds that the disclosure statement should reach you before you sign or within five working days, so read it as soon as it arrives.
What that looks like when you apply
In real life, the rules show up as ordinary steps. Expect most of the following.
- A question about the purpose. A car, a ute for work, or something else.
- Proof of income. Payslips, or bank statements showing pay arriving. If you are self-employed or paid by the job, expect more months of statements.
- Your costs. Rent or board, power, phone, insurance, childcare, and existing loan repayments.
- A credit check, with your consent.
- The car details, because the car is the security.
- A disclosure statement, showing the rate, fees and total repayable.
A lender can also ask follow-up questions if something does not add up. That is the reasonable-inquiry duty at work. Our guide to what you need to apply lists the documents, and the minimum income guide covers how income is weighed.
What the rules do not do
It helps to be clear about the limits, so you do not expect more than the law gives you.
- They do not mean a yes. A lender may decline you, offer less than you asked for, or ask for a deposit. Ask for the main reason if you are declined.
- They do not cap every rate. Interest and fees are restricted only for high-cost consumer credit, which the Act defines as loans at 50 percent per annum or more. For those loans there is a total cost cap of 100 percent of the first advance and a daily cap of 0.8 percent of the credit. Most car loans sit below that line, so compare them yourself.
- They do not remove your own duties. You still have to give accurate information and make the repayments.
Fair Finance cannot say whether any one lender has met its duties. If you think yours has not, the complaints route below is where to go.
If you think a lender broke the rules
Signs worth checking include a lender that did not ask about your income or costs, one that pushed you into a bigger loan than you needed, fees that look unreasonable, or no disclosure statement.
- Write down what happened, with dates, and keep your contract, messages and statements.
- Complain to the lender using its complaints process, which every lender must have.
- Go to its dispute resolution scheme if you do not get a fair answer.
- Ask for help. A free financial mentor, a Community Law centre or a Citizens Advice Bureau can read your contract with you. MoneyTalks is on 0800 345 123.
Consumer Protection notes that if a disclosure is wrong or missing, the lender cannot charge fees or interest for that period and cannot enforce other terms until it is fixed. A court decides what relief applies in some cases.
A worked example (illustrative numbers only)
Say you earn $1,000 a week after tax and apply for a $12,000 car loan over four years at an illustrative 14 percent. The repayment is about $76 a week, so the interest comes to roughly $3,700. The lender asks what you spend.
| Weekly | |
|---|---|
| Income | $1,000 |
| Rent | $380 |
| Power, phone, internet | $60 |
| Groceries and transport | $200 |
| Insurance and other debts | $90 |
| Left over | $270 |
| Car loan | $76 |
| Remaining after loan | about $194 |
On those numbers the lender can see a margin. Change the rent to $520 and the margin shrinks to about $54, and a careful lender will ask more questions or offer less. That is the affordability test at work. The figures are made up. Use the repayment calculator with your own numbers before you apply.
Red flags
- A lender that asks nothing about your income or spending. That is a sign it is not making reasonable inquiries.
- A loan bigger than the car needs, with add-ons rolled in.
- No disclosure statement, or one you are rushed to sign.
- Pressure to sign today.
- A lender you cannot find on the Financial Service Providers Register. An unregistered lender cannot legally give credit.
- Fees that look like profit, not cost recovery.
How Fair Finance helps
We send one online application to a panel of approved lenders, using one soft credit check, so you do not collect hard enquiries at each lender. The lender then runs its own responsible lending checks and decides case by case. We are paid by the lender only if a loan settles, and this never changes your rate. Nobody can promise approval. Start with the quick check.
Checklist
- Three months of bank statements ready
- A list of regular weekly costs and existing repayments
- The purpose of the loan clear in your mind
- The lender checked on the Financial Service Providers Register
- Disclosure statement read before signing
- Total repayable and every fee noted
- Complaints process and dispute scheme named in the paperwork
General information only, not legal or financial advice. The law and regulators change, so check the official pages below.
Sources
Common questions
What is the CCCFA?
The Credit Contracts and Consumer Finance Act is the New Zealand law that sets out how lenders must treat people who borrow for personal, family or household purposes. It covers things like affordability checks, written disclosure, fees and fair treatment when you fall behind. Car loans for personal use usually fall under it.
Is the Responsible Lending Code law?
The Code is not binding. It is guidance issued under the Act, and a lender that shows it followed the Code can use that as evidence it met its responsible lending duties. The duties themselves are in the Act.
Does the CCCFA mean a lender has to approve my car loan?
No. The rules say a lender must not lend unless it is satisfied you are likely to repay without substantial hardship. They protect you from unaffordable lending, but they do not give you a right to be accepted. Lenders decide case by case, and nobody can promise approval.
What happens if a lender breaks the rules?
Complain to the lender first, then to its dispute resolution scheme if you are not satisfied. You can also ask the lender to change or cancel the contract. Penalties for breaching the lender responsibility principles can reach $600,000 for a company and $200,000 for an individual.
Why does a lender ask so many questions about my spending?
Because the law requires it. A lender must make reasonable inquiries to be satisfied you can afford the repayments, and it must keep records of what it checked. Bank statements and a list of regular costs are the usual evidence.
Who enforces the CCCFA now?
The Financial Markets Authority took over from the Commerce Commission on 1 July 2026. Lenders certified before that date were moved onto a licence under the Financial Markets Conduct Act. Your rights as a borrower did not disappear in the move.
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