New regulations on high-cost loans will protect Kiwis from irresponsible lenders
In effect from 1st May 2020
New rules introduced by the New Zealand Government have changed the way you can borrow money. We’ve worked alongside MBIE to support these rules and are here to help you understand the fine print! We hope the new High-Cost (HC) Loan regulations will make borrowing safer and protect Kiwis from irresponsible lenders.
The regulations below only apply to "High-Cost" (HC) Loans. HC refers to any loan with an annual interest rate of 50% or above. SMB is no longer an HC lender.
Total cost of credit cap
You will never pay back more than double your initial loan advance in interest and fees. This means you can no longer offer top-ups on existing HC KickStart Loans, and customers with an open KickStart loan must close this loan before we can offer a new loan. We will offer top-ups on our new non-HC Flex loan!
Example: Kevin takes out an HC loan of $2000, which means he can only repay including fees and interest & any other costs cannot exceed $4000.
15 day stand down period
All borrowers are required to wait 15 days after they have fully repaid their most recent HC loan, to take out another loan.
Example: Kevin pays off his HC loan in full with SMB on 1 May 2020, SMB cannot approve another loan for Kevin until 16 May 2020. If Kevin has an HC loan with another lender, SMB can now approve a Non-High-Cost Loan for Kevin at any time.
Limit on default fees
For HC loans default fees cannot exceed $30 (or any other amount set by regulation) unless the lender can prove that the default fee is reasonable. SMB's current default fee is $30, so this change will not affect our current fee structure!
Only one open high-cost loan
You can only have one open HC loan at any one time. This is to protect customers from building up unmanageable amounts of HC loans… Choose your lender wisely!
SMB can consolidate your high-cost debt with other lenders into our new Flex Loan.
0. 8% daily rate cap
The new regulations impose a daily rate cap of 0.8% on all HC loans. This limit includes interest, credit fees, or charges passed on by the lender but does not include default fees.
Need help? Talk to us!
If you want further help understanding how these new regulations affect you, get in touch with one of our friendly customer team members today!
Call us FREE on 03 288 2562 or email us at support@smb.nz
