This update provides important information that all motor vehicle traders and their sales and customer support teams should be aware of.
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November 2021
This update provides important information that all motor vehicle traders and their sales and customer support teams should be aware of.
In this issue we bring you important information about changes to credit laws, a Commerce Commission review of motor vehicle financing and add-ons, EV and PHEV rebates extension, changes to fuel economy testing standard and a safety rating update.
Credit laws are changing
For many people, a vehicle is their most important asset after housing and it’s common to borrow money to purchase a vehicle. The lender financing the purchase must follow New Zealand credit laws. Where a lender uses a dealer agent to assist in the financing, the lender needs to ensure the dealer has systems and processes in place to support the lender to comply with their obligations under credit laws.
On 1 December 2021, changes to the Consumer Credit Contracts and Finance Act (CCCFA) including responsible lending comes into effect. These changes are to ensure lenders exercise more care and skill when offering loans or credit so that what is offered is suitable and affordable for the borrower.
You can read an overview of all the changes to the credit laws on the Commerce Commission’s website. Some of the key changes apply to the Lender Responsibility Principles and what lenders will need to do to assess for the suitability and affordability of the loan and extended warranties, repayment waivers and/or insurances sold with them.
Changes to credit laws - Commerce Commission New Zealand Te Komihana Tauhokohoko
What you need to do
If you arrange finance, what you need to do to check for loan suitability and affordability will depend on the arrangement you have with your financier. If you are expected to carry out some of the lender responsibilities in the financing process such as gathering documentation and information through asking the borrower questions, then you can expect your lender will want to ensure you have appropriate systems and processes and staff training in place to carry this out.
What you need to be aware of
From 1 December 2021, the loan application process is likely to take more time to ensure the steps required by the new regulations are carried out. If steps are missed and the lender did not properly assess that the loan was suitable and affordable, they could face civil pecuniary penalties of up to $200,000 for an individual, $600,000 for a company plus statutory damages equal to the costs of borrowing (the interest and fees under the contract).
The Responsible Lending Code (Code) has been revised and will come into force on 1 December 2021 superseding the current Code. The Code provides extensive guidance on how to comply with the Lender Responsibility Principles and you should familiarise yourself with this.
Key changes with assessing for suitability and affordability
To assess for loan suitability, lenders will need to gather information to determine certain aspects about the borrower’s requirements and objectives. These aspects are set out in the regulations.
To assess for loan affordability, lenders can no longer solely rely on asking the borrower questions about income and expenses. They will need to verify some information using reliable documentation. If they can’t verify the borrower’s income or determine that the amount and source is realistic, they won’t be able to include it in their assessment.
Lenders need to do a thorough assessment in most circumstances to work out whether the borrower will have a reasonable budget surplus or a deficit after the loan repayment is included. They will need to decide the outcome based on whether the borrower’s income exceeds their expenses because there is a reasonable surplus (after the loan repayment) or the lender has included buffers where required.
You can read more about assessing for suitability and affordability under new credit laws.
Advertising
From 1 December 2021, new advertising standards will take effect. New rules set out prohibited wording that gives the impression a borrower’s circumstances will not be taken into account.
If lenders breach the advertising standards, they can be liable for penalties up to $600,000 plus statutory damages equal to the costs of borrowing. You read more about the new advertising standards.
Advertising and fees [PDF, 248 KB] - Commerce Commission New Zealand Te Komihana Tauhokohoko
Disclosure
New disclosure rules will also come into force on 1 December 2021. The key aspect for motor vehicle dealers arranging finance to be aware of is when lenders’ ads are in another language and key information about the loan may need to be provided in the advertising language. You can read more about the new disclosure rules.
Disclosure [PDF, 295 KB] - Commerce Commission New Zealand Te Komihana Tauhokohoko
Motor vehicle financing and add-on products review
On 10 November, the Commerce Commission released a report following its review of the sale of motor vehicle financing and related add-on products.
The review aims to understand the roles and responsibilities of industry participants during the sales and lending process and to identify business practices which have the potential to cause harm to consumers.
The full report can be found on the Commerce Commission’s website.
EV and PHEV rebates extended to April 2022. Wider scheme of rebates and charges to follow.
Due to the disruption caused by the current Delta outbreak, the expanded Clean Car Discount rebates and fees will begin from 1 April 2022. This will help give the industry more time to gear up and the current rebates on electric and plug-in hybrid vehicles will continue until 31 March 2022.
More information on the Clean Vehicles Bill passes first checkpoint - Beehive.govt.nz
Fuel economy testing standard is changing
New Zealand is joining a global shift to a newer international vehicle fuel economy testing standard – the Worldwide Harmonised Light Vehicles Testing Procedure (WLTP).
WLTP replaces the longstanding NEDC (New European Driving Cycle) testing standard which is widely considered to be out of date and inconsistent with real-life driving.
The WLTP is a worldwide standard for testing fuel economy, CO2 emissions and electric vehicle (EV) range of passenger and light commercial vehicles. It is a standardised laboratory test based on real driving data and a modified test cycle with stricter specifications to provide a more robust basis for calculating vehicle fuel consumption and EV range.
What motor vehicle traders need to know
From 1 December 2021, when you generate a new Vehicle Fuel Economy Label (VFEL) or information for online listings, the fuel economy shown will have been standardised to WLTP. There will be no change to the VFEL except for the addition of a text box at the top of the label to identify that the data has been standardised to WLTP (WLTP values standardised to Worldwide Harmonised Light Vehicles Test Procedure).
What consumers need to know
Because the WLTP laboratory testing better represents real-life driving conditions, fuel consumption may appear higher, and EV range lower, than under the old standard which typically overstated figures. The vehicle’s performance hasn’t changed, just the way fuel economy is measured is more realistic. Actual fuel economy may vary due many factors including individual driving styles, traffic and weather conditions, vehicle loading, vehicle maintenance and tyre pressures.
Further information and a list of frequently asked questions can be found on the EECA website.
Safety rating update 1 December
From 1 December, safety ratings published by Waka Kotahi New Zealand Transport Agency on the Rightcar website will focus on the impact vehicles have on all people involved in crashes on New Zealand roads. This change will lead to a greater improvement in road safety, helping to reduce the number of people who die or are seriously injured on our roads.
To standardise the way safety rating information is presented to the public, both Used Car Safety Ratings (UCSR) and Vehicle Safety Risk Ratings (VSRR) will be using overall safety as the primary measure of safety. This measures the safety of a vehicle for its own occupants and also all road users in the event of a crash, including people in other cars, pedestrians, cyclists, and motorcyclists. The overall safety rating will also be used for the safety rating published on third party websites such as TradeMe.
The Rightcar update includes an annual ratings update, with the latest safety ratings for all vehicles in New Zealand which have been assessed by Monash University’s Accident Research Centre using a database of 8 million crashes. Since the ratings measure the relative safety of vehicles compared to all others on the road, the current ratings for some vehicles in New Zealand will change from 1 December, reflecting that newer, safer vehicles continue to enter the fleet.
