National List MP Aaron Gilmore has put together a useful private member’s bill. It will:
require banks and other credit providers to include the dollar amount of any break fee payable in the credit contract, as well as a plain English description of the calculation.
Transparency is a good thing. This is the first private members bill by a National MP since the election, so hopefully it will get picked from the ballot.
The full bill is after the break:
This Act is the Credit Contracts and Consumer Finance (Break Fees Disclosure) Amendment Act 2009.
This Act comes into force on the day after the date on which it receives the Royal Assent.
3 Principal Act amended
This Act amends the Credit Contracts and Consumer Finance Act 2003.
The purpose of this Act is to amend the Credit Contracts and Consumer Finance Act 2003 to require every creditor under a consumer credit contract to disclose any fees that will be incurred by a debtor should the debtor break that contract.
5 Definition of break fees
The principal Act is amended by inserting the following definitions into section 5:
“break fees means fees or charges payable in dollar terms to the creditor under a consumer credit contract when the debtor breaks or voluntarily ends the life of that contract before its agreed expiration date
“Minister means the Minister of Commerce”
6. New section 17A
The principal Act is amended by inserting a new section 17A as follows:
“17A Disclosure of break fees
(1) In addition to the disclosure of the information required under section 17, every creditor under a consumer credit contract must disclose any break fees that may be payable in relation to the contract.
(2) Where break fees may be payable under a consumer credit contract every creditor must provide—
(i) a plain English explanation of how the applicable break fees are calculated; and
(ii) a formula for how the break fees are calculated; and
(iii) a schedule of break fees payable calculated over a range of possible interest rates in whole percentage points and possible break dates in whole calendar years.
(3) The information disclosed under subsections (1) and (2) must be included in the individual details of each consumer credit contract. It is not sufficient disclosure for the information to be contained in general terms and conditions referred to in, or appended to, the contract.
(4) Disclosure under this section must be made—
(a) before the contract is made; or
(b) within 5 working days of the day on which the contract is made.”