Question

Question 3: Credit contracts

a) What information must be disclosed to satisfy the requirements of initial disclosure under the Credit Contracts and Consumer Finance Act 2003? Refer to a section in the Act to support your answer.

b) To who do the oppression parts of the Credit Contracts and Consumer Finance Act 2003 apply? Refer to a section in the Act to support your answer.

c) Hamish is a lawyer who owns a home with expansive sea views in an exclusive Auckland suburb. His neighbour’s house is for sale. Hamish wants to buy the house so that he can protect the sea views of his own property and build a couple of town houses. Although he has no experience with property development Hamish believes that the he will make a tidy profit by selling the townhouses.

Hamish has no difficulty initially borrowing money for the project. All goes well until Hamish is advised that additional drainage will be required before the necessary retaining wall can be built. Hamish needs to find another $100,000 quickly to keep the project on track.

Hamish’s usual bank won’t lend Hamish any more money given the large amount of money he already owes. Hamish approaches a finance company for the $100,000. They agree to lend him the money by way of an unsecured loan with interest of 32% to be repaid within three months, with penalty interest payable on any amount outstanding thereafter.

Hamish subsequently fails to repay the $100,000.

Advise Hamish whether he might have a claim against the finance company for oppression under the Credit Contracts and Consumer Finance Act 2003.

Refer to any relevant provisions of the Act in support of your answer and refer to a case. In your answer make sure that you refer to three possible grounds of oppression and whether or not they apply

Answer 1

Ans 3 (a). As per Credit contracts and consumer finance act 2003 , Initial discslosure will be as follows.

1. Every creditor under the credit contract and consumer finance act 2003 must ensure that disclosure of as much of key useful information set out in schedule I applicable to contract is made to every debtors - a) before the contract is made or b) within 5 workings daysfrom the date when the contract is made.

2. Every creditro under the above said act ensure that a copy of all the terms of contract not disclosed under subsection (1) is given or sent to every debtor a) before the contract is made or b) within 5 working days from the date when then contract is made

3. For the purpose of sub section 2 the copy of terms of contract is to be sent in the same manner as specified in disclosure requirement of secion 35

Ans 3 (b) Applicability of opression

Oppressive means harsh,unjustified or break of coomercial terms of practice.

The oppression part applies to :

a. Every Credit contract ( consumer or non consumer both), b. Every consumer Lease C. Every buy back transaction

Ans 3(c) As per the credit contract and consumer finance act 2003, a contract can be called as oppressive based on the folllowing grounds :

i) Harsh

ii) Unjustly burdunsome

iii) breach of reasonable standard on commercial practice.

In the above said case law Hamish was availed the loan from finance company as a unsecured loan with the interest rate of 32% which is almost double or might be triple from the normal rate for lending in the normal banking business. In this case there is breach of reasonable standard on commercial practice, as the normal business rate of lending would be 10 to 12.5% p.a.

In the view of above provision hamish will have the claim against the finance company for oppression unde the credit contract and consumer finance act 2003.