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Credit Contracts and Consumer Finance Act 2003

Consumer credit contracts - Provisions relating to debtors under high-cost consumer credit contracts - Rules

45I: Compound interest prohibited

You could also call this:

"You don't pay interest on interest you already owe."

Illustration for Credit Contracts and Consumer Finance Act 2003

You cannot have compound interest on a high-cost consumer credit contract. This means you do not have to pay interest on interest you already owe. If you make a payment that includes compound interest, section 48 applies.

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View the original legislation for this page at https://legislation.govt.nz/act/public/1986/0120/latest/link.aspx?id=LMS347743.

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Topics:
Money and consumer rights > Consumer protection
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45J: Default fees, or

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Part 2Consumer credit contracts
Provisions relating to debtors under high-cost consumer credit contracts: Rules

45ICompound interest prohibited

  1. A high-cost consumer credit contract must not provide for compound interest.

  2. No person may be a creditor under a high-cost consumer credit contract that provides for compound interest or accept a payment, or debit a fee or charge to the debtor’s account, in respect of compound interest.

  3. Section 48 also applies if a payment is in respect of compound interest.

  4. In this section, compound interest, to avoid doubt, includes interest on any amount of additional credit that has been provided to repay accrued interest.

Notes
  • Section 45I: inserted, on , by section 25 of the Credit Contracts Legislation Amendment Act 2019 (2019 No 81).