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Credit Contracts and Consumer Finance Act 2003

Consumer credit contracts - Payments - Prepayments

54: Creditor's loss arising from full prepayment

You could also call this:

"What happens when you pay off a loan early and the creditor loses money"

Illustration for Credit Contracts and Consumer Finance Act 2003

You need to know how a creditor calculates their loss when you pay off a loan early. A creditor must use a fair method to work out their loss, which can be found in regulations or in your loan contract. They must choose one of these methods to calculate their loss. You should understand that if a creditor uses the method from regulations, the calculated amount is considered a fair estimate of their loss in court. This means the court will accept this amount as the creditor's loss when making decisions. The creditor's loss is important when you pay off a loan early.

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View the original legislation for this page at https://legislation.govt.nz/act/public/1986/0120/latest/link.aspx?id=DLM213106.

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Topics:
Money and consumer rights > Banking and loans
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Part 2Consumer credit contracts
Payments: Prepayments

54Creditor's loss arising from full prepayment

  1. A creditor must calculate a reasonable estimate of its loss arising from a full prepayment using—

  2. a procedure prescribed for the purposes of this section by regulations; or
    1. an appropriate procedure set out in the consumer credit contract for calculating that loss.

      1. If a creditor uses a procedure prescribed for the purposes of this section by regulations, the amount calculated is to be treated in any court and in any proceedings under this Act as a reasonable estimate of the creditor's loss.