Credit card statements to get minimum repayment warning
Credit card users will get a little something extra on their statements from June - a warning that paying off less now will cost them more later.
Announcing the regulations on Thursday, Commerce and Consumer Affairs Minister Paul Goldsmith said the changes aimed to give consumers information they needed to make informed credit decisions.
Credit card statements would include a minimum repayment warning from June, stating that paying only the minimum amount each month would end up costing the consumer more as they accrued interest.
Better information meant consumers could compare the rates and fees offered by all lenders before borrowing money, Goldsmith said.
"The reforms aim to promote fair, efficient and transparent credit markets and promote competition, consumer choice and protection," he said.
The chief executive of lobby group the New Zealand Bankers' Association, Kirk Hope, said the group supported the Government's changes.
The NZBA submission on credit card statement warnings said between 1 and 3 per cent of New Zealand credit card customers paid the minimum each month.
That figure was significantly lower than in the United States and the United Kingdom, where as many as 13 to 14 per cent made the minimum repayment each month.
Only a third of US customers paid their credit card off in full, while in New Zealand that figure was over half.
The Government's position on early repayment warnings was appropriate for New Zealand, Hope said.
"It seems a responsible thing to do."
The changes were part of reforms to consumer credit legislation coming into effect on June 6.
The regulations gave effect to new requirements introduced by the Credit Contracts and Consumer Finance Amendment Act, which passed into law in June 2014.
Goldsmith recently released the Responsible Lending Code, which supported the responsible lending principles in the CCCFA.
The principles require a lender to act with care, diligence and skill in all their dealings with borrowers - including having to find out whether a borrower can make repayments without suffering substantial hardship.
Other changes to credit laws designed to better protect borrowers included increased disclosure, new repossession laws, and greater enforcement and penalties for offences.