Responsible lending
The duty lenders have to make sure a loan is suitable and affordable for you. It is a legal requirement under the CCCFA.
Responsible lending is the principle that a lender must only give you a loan you can actually afford and that suits your needs. It is a core duty under the CCCFA.
In practice, it means a lender should check your income and expenses, make sure the repayments fit your budget, and explain the loan clearly so you understand what you are agreeing to.
It protects you from being loaded up with debt you cannot handle. If a lender does not lend responsibly, they can face penalties.
The Act sets the duty, the Code explains how to meet it
The Act contains the lender responsibility principles. The Responsible Lending Code, prepared by MBIE, is guidance on how lenders can meet those principles in practice. It is not binding, but if a lender can show it followed the Code, that can be used as evidence it met its obligations. So the Act is the rule and the Code is the worked example. Chapter 5 of the Code covers affordability. The Code was revised and took effect on 31 July 2024.
What lenders must do in practice
- Ask about your requirements and objectives. What the loan is for, whether it meets your needs, whether you need extras such as insurance, and how you want to repay.
- Check affordability. Before lending, or making a material change to a loan, a lender must make reasonable inquiries, such as asking for evidence of income and expenses, and be satisfied you are likely to repay without substantial hardship. It must keep records of the inquiries it made.
- Advertise and disclose honestly. Adverts, loan documents and other communications must be clear and not misleading. You must get a disclosure statement before you sign.
- Keep you informed. Copies of key documents, account updates at least every six months, and any mid-loan change put in writing before it takes effect.
- Treat you fairly when things go wrong. That covers missed payments, hardship requests and repossession. Lenders may only repossess goods listed as security, and must stop adding interest and fees once a repossessed item is sold.
What changed in 2024 and what did not
From 1 December 2021 to 30 July 2024, detailed affordability regulations told lenders exactly which checks to make. Those were revoked from 31 July 2024, which the Government said would give lenders more flexibility. The duty itself did not go away. A lender that fails to make reasonable inquiries can still breach the principle and face penalties. From 1 July 2026 the Financial Markets Authority, not the Commerce Commission, is the regulator.
What this looks like when you apply
You may be asked for payslips, bank statements or a Work and Income statement, plus a rough list of your regular costs. Be accurate. Understating expenses to get a bigger loan can leave you short each week. If a lender asks few questions or pushes you to borrow more than you need, that is a warning sign. Compare the offer against your own budget, and check the fees in the disclosure statement.
This is why we ask for proof of income and details about your situation. It is not to catch you out, it is to match you with a loan that works for you. Every lender we refer to follows these rules. If you would like to see where you stand first, check your options with one soft credit check. Nobody can promise approval, since lenders decide case by case. When you are ready, get your fair rate.
Worried about repayments you already have? Our guide to struggling to pay your car loan covers your options, and a soft credit check is a low-pressure first step toward a fresh start.
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Common questions
What is the Responsible Lending Code?
It is guidance prepared by MBIE on how lenders can meet the lender responsibility principles in the CCCFA. It is not binding, but showing you followed it can be evidence a lender met its obligations. The current revision took effect on 31 July 2024.
What does a lender have to check before lending?
A lender must make reasonable inquiries, such as asking for evidence of income and expenses, and be satisfied you are likely to make repayments without substantial hardship. It must also ask what the loan is for and whether it suits your needs.
Did the rules get weaker in 2024?
The detailed affordability regulations were revoked from 31 July 2024, giving lenders more flexibility in how they assess affordability. The duty to lend responsibly stayed in the CCCFA.
Who do I complain to if a lender did not lend responsibly?
Start with the lender, then its approved dispute resolution scheme. The FMA, which took over CCCFA regulation on 1 July 2026, accepts reports of concerning behaviour through its website.
See your repayments, then get a fair rate.
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