The Commerce Commission has now issued its finalised annual returns guidance (‘Guidance’) for lenders who provide consumer credit. This gives some much welcome certainty as to what information will need to be provided in a lender’s annual return, and follows the consultation process which was completed in January 2023.

Under the Credit Contracts and Consumer Finance Act 2003, every creditor under a consumer contract must provide an annual return in the prescribed manner to the Commerce Commission.  The annual return period is for the 12 months commencing 1 April to 30 March in each year (a ‘relevant period’). Lenders will be required to submit their first annual return due by 30 June 2024. 

The annual return is required to be submitted online through a secured portal on the Commerce Commission’s website. There will be no fee to submit an annual return.

What do lenders need to include in the annual return?

For the relevant period, a lender must include the following:

• the number of other consumer credit contracts entered into (including those contracts that the lender has treated as consumer credit contracts)
• the number of material changes to consumer credit contracts entered into (including those contracts that the lender has treated as consumer credit contracts)
• for each of the type of credit contract entered into, or material change to a credit contract:
  • for credit contracts that are not revolving credit contracts, the total dollar amount to be advanced;
  • for revolving credit contracts, the total credit limit;
  • the number of times that the lender has relied on any of the exceptions that may be applicable when conducting the affordability assessment under the Credit Contracts and Consumer Finance Regulations 2004.

For lenders who provide high-cost consumer credit loans, they must also include the number of high-cost consumer credit contracts and high-cost related consumer credit contracts entered into.

A few practical tips for consumer credit lenders

1. Your systems should be set up to identify the dates contracts are entered into for the relevant period. When submitting your annual return online, the Commerce Commission will provide an option for you to provide an explanation or context around the information you provide, including how you have determined the appropriate dates for reporting.
2. If you have a loan that has been documented in more than one document and you treat each of the loan as separate contracts, then those contracts should be counted individually. For example, if you have entered a loan with a borrower that includes a floating rate and a fixed rate together with a term loan facility, and these are documented separately and on different dates, these should be counted as three contracts.
3. Don’t be caught out by not including material changes to contracts and their details. Material changes to a contract include increasing the credit limit, or making an additional advance not originally considered when the initial suitability and affordability assessment was carried out. Any new limit and additional advance will need to be reported.

What can be excluded from the annual return?

Lenders are not required to provide the following:

• any information about an identifiable individual
• any information that is not in its possession or control nor reasonably ascertainable from information in its possession or control
• any breakdown of information relating to consumer credit contracts (including those contracts that are  treated as consumer credit contracts). However, the online annual return form will allow for this information to be given, as the Commerce Commission is encouraging the provision of a further breakdown by product type beyond the three categories of contracts (i.e., high-consumer credit contracts, high-cost related consumer credit contracts and other consumer credit contracts (including those treated as consumer credit contracts)).

When do annual returns need to be provided?

They must be submitted by 30 June in each year. As mentioned above, the first annual return will be due by 30 June 2024.

What are the consequences for not providing an annual return?

If a lender fails to comply with its obligation to provide an annual return, it would be an infringement offence and the lender may be liable on conviction to a fine not exceeding NZ$30,000 for a body corporate (NZ$10,000 for individuals).

The Commerce Commission can also issue an infringement notice, where lenders would have to pay an infringement fee of NZ$1,000 for any breach of an annual return.

If a lender makes or authorises the making of a false or misleading statement in its annual return, and/or makes or authorises a false or misleading statement knowing it to be false or misleading, this is an offence which a lender may be liable on conviction to a fine not exceeding NZ$600,000 for a body corporate (NZ$200,000 for individuals).

Key takeaway

As we are now a few days past 1 April, the relevant period for the 2024 annual return has started. Lenders of consumer credit must ensure its systems and record keeping processes are up to date so the required annual return information is captured, recorded in appropriate format, and stored in a manner that can be readily retrieved and accessed. For institutional lenders, this will involve particularly large amounts of information to be handled and managed. By having good processes in place now, lenders will save themselves a lot of potential pain down the line by preparing well in advance before the 2024 annual returns become due.

A link to the Commerce Commission’s Guidance can be found here.