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Credit Contracts and Consumer Finance Act 2003

Consumer credit contracts - Interest charges

39: Limit on interest charges

You could also call this:

"There's a limit on how much interest you can be charged on a loan."

Illustration for Credit Contracts and Consumer Finance Act 2003

You have a consumer credit contract and you want to know about interest charges. The most interest you can be charged is worked out using the daily interest rate and your unpaid balance. You can be charged interest in different ways, depending on your contract. You can be charged interest daily, or for a week, fortnight, month, quarter of a year, or half a year. The interest is worked out using the annual interest rate, divided by the number of weeks or months in that period. This is applied to your average unpaid daily balance. This rule does not stop you being charged default interest if you do not follow your contract and as stated in section 40.

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View the original legislation for this page at https://legislation.govt.nz/act/public/1986/0120/latest/link.aspx?id=DLM212785.

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Topics:
Money and consumer rights > Consumer protection
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38: Early debit or payment of interest charges prohibited, or

"No paying interest before it's due"

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40: Default interest charges, or

"What happens if you don't pay your credit contract on time"

Part 2Consumer credit contracts
Interest charges

39Limit on interest charges

  1. The maximum amount of an interest charge that may be imposed or provided for under a consumer credit contract is,—

  2. in the case of 1 annual interest rate applying to the unpaid balances under the contract, the amount determined by applying the daily interest rate to the unpaid daily balances; or
    1. in any other case, the sum of each of the amounts determined by applying each daily interest rate to that part of the unpaid daily balances that it applies to under the contract.

      1. However, an interest charge under a consumer credit contract for a week, a fortnight, a month, a quarter of a year, or a half of a year may be determined by applying the annual interest rate or rates, divided by 52 (for a week), by 26 (for a fortnight), by 12 (for a month), by 4 (for a quarter of a year), or by 2 (for a half of a year), to the whole or that part of the average unpaid daily balances that it applies to.

      2. This section does not prevent the imposition, in accordance with the consumer credit contract and section 40, of default interest charges.