Commerce Commission releases draft credit fees guidelines
Following the Supreme Court’s decision in the long-running Sportzone case, the Commerce Commission has released its draft Guidelines on Consumer Credit Fees under the Credit Contracts and Consumer Finance Act 2003 (CCCFA).
The Guidelines are designed to assist lenders when setting credit fees, and the Commission is currently seeking feedback before releasing the final Guidelines. A significant focus of the Guidelines is pulling together guidance from the four separate court decisions in the Sportzone case. A helpful feature of the draft Guidelines is the inclusion of tables which set out the types of costs that, in the Commission’s view, can and cannot be recovered by lenders by way of establishment fees, other credit fees and default fees.
Submissions from interested parties are required by 25 October.
On the topic of credit fees, the Commission is seeking a court ruling on a ‘case stated’ basis to clarify whether fees charged by peer to peer lender Harmoney are subject to the CCCFA. See here for more detail, or read about current charges filed against Harmoney for alleged breaches of the Fair Trading Act 1986 here.
Unfair Contract Terms – energy industry, credit providers and gyms
Following on from the Commerce Commission’s first report on the unfair contract terms (UCT) regime in February, which focussed on the telecommunications industry, the Commission has now released its second UCT report.
The second report focuses on the energy industry, following the Commission’s stated aim to target industries which provide essential (and common) services to New Zealanders. These reports are intended to provide guidance to businesses which enter into ‘standard form consumer contracts’.
The provisions in the Fair Trading Act 1986 include a ‘grey list’ of terms likely to be considered unfair in standard form consumer contracts. The Commission’s investigations have uncovered a number of problematic clauses in both reports. For the energy industry, 59 terms were considered potentially unfair. Nine energy companies (comprising 90% of the energy retail market) were part of the Commission’s review. As with the telecommunications industry, the energy industry has been cooperative, and court proceedings have not been required.
The full reports can be found here.
The Commission has confirmed that the next ‘target’ industries will be credit providers and gyms.
AML/CFT for lawyers, accountants and others – consultation paper
The Ministry of Justice has released a consultation paper seeking feedback on Phase Two of the Anti-Money Laundering and Countering Financing of Terrorism (AML/CFT) regime. The implementation of Phase Two will require certain businesses and professions not currently captured by the regime to put AML/CFT measures in place, namely:
- real estate agents and conveyancers;
- some high-value goods dealers; and
- some additional parts of the gambling sector.
Minor changes to aspects of the current regime are also a possibility.
Phase One took effect from 30 June 2013. In respect of Phase Two, it is intended that:
- a Bill will be introduced to Parliament later this year;
- the Bill will be passed by July 2017; and
- there will then be an implementation period before the amendments come into effect. Submissions are sought on the length of that period, and the Government expects that it will be less than the four years allowed for the full implementation of Phase One.
The Ministry of Justice is seeking input from members of the relevant industries (and others) on which activities should be subject to AML/CFT requirements under Phase Two, and how those requirements should be implemented in the context of current business structures and practices. Further issues raised by the consultation paper include:
- which supervisory model to adopt, ie multi-agency supervision (which is the current NZ model), a single supervisor (the Australian model), or multiple agencies with self-regulatory bodies (the UK model);
- whether the suspicious transaction reporting process should be expanded from a transactions-based model to an activity-based model;
- potential enhancements to information sharing between regulators;
- potential enhancements to reporting entities’ ability to rely on third parties to meet their AML/CFT obligations; and
- the expansion of circumstances in which simplified customer due diligence is appropriate.
Submissions are required by 16 September.
See here for our previous update on the AML/CFT regime and the Shewan Report.
Financial Adviser receives warning from FMA
A financial adviser has received a warning from the Financial Markets Authority for engaging in suspected misleading or deceptive conduct in circumstances where he advised his clients of an alternative life cover plan but failed to provide them with any information about policy pricing. The advisor subsequently completed and submitted a direct debit form and declaration of good health on his clients’ behalf without authority.
Following an investigation, the FMA ultimately concluded that the public interest supported a warning rather than prosecution. Factors relevant to the determination were that:
- the adviser’s employment was terminated;
- he voluntarily deregistered from the Financial Service Providers Register;
- he cooperated with the FMA during its investigation;
- the FMA was satisfied that no threat is posed to future or existing clients;
- the individual made no financial gain; and
- the clients suffered no monetary loss and remained insured.
For these reasons, the FMA chose not to name the individual concerned. The full media release is available here.
The case represents an application of the FMA’s enforcement policy, which has recently been updated. All entities regulated by the FMA should be familiar with this policy.
This publication is intended only to provide a summary of the subject covered. It does not purport to be comprehensive or to provide legal advice. No person should act in reliance on any statement contained in this publication without first obtaining specific professional advice.