Credit Contracts Act effective soon

Press, 29 May 1982, Page 18

Credit Contracts Act effective soon

What may be the most complex legislation in New Zealand for years comes into effect on Tuesday: the Credit Contracts Act. Those who will feel the brunt of the change are the solicitors of finance companies, according to Mr J. G. Matthews, a spokesman for the Canterbury District Law Society. The act has made necessary changes to the documentation of all contracts for credit transactions, including of course, hire-pur-chase. “It’s a good deal more complicated than any piece of legislation I’ve seen in the last decade,” said Mr Matthews. District law societies have held more seminars, attended by more practitioners, than for any other legislation that he can remember. It was not comprehensible to the man in the street, which was not a good thing, said Mr Matthews. However, benefits for the man in the street are that, from Tuesday, all cost of credit will have to be available to him at a standard rate, so that he can make an accurate comparison between the credit costs offered by organisations. In the past this has often been difficult with hidden charges

and different types of interest rates being quoted by various firms.

The new finance rate will be based on the cost of the loan in relation to the amount borrowed.

Another advantage to the public is that within three days of purchase the buyer will have the right to change his mind and pay cash, although, Mr Matthews emphasises, this does not mean the buyer may renege on the purchase: he must take the goods, though not the means of finance offered.

The legislation arises from a wide-ranging report on credit made by the Contracts and Commercial Law Reform Committee in the 19605. Part of its findings were enacted in the Hire Purchase Act of 1971; the Credit Contracts Act reflects the balance of the report, in the opinion of Mr Matthews. “It undoubtedly replaces an unsuitable act — the Moneylenders Act — but it replaces unsatisfactory but simple legislation with a complex act that may trip peope up and will be difficult to administer.”

The intention of the legislation was quite beneficial, but Parliament had used a sledgehammer to crack a nut.

Mr Matthews said he did not think the act was likely

to affect the availability of money.

"I think it is also unlikely to affect fees, but this possibility will undoubtedly be reviewed by the New Zealand Law Society after the act has been in force for some time.”

Any increase would be justified if more practitioners' time was involved or greater responsibility was felt, he added.