Answering question CCCFA PDF

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Exam question CCCFA – Katie Oh CCCFA The Purpose of part 5 of CCCFA is to protect interests of consumers with credit contracts, consumer leases, and buy-back transactions, provide adequate disclosure and general rules for credit contracts and holds creditors accountable for being responsible. To determine whether Katie falls meet the requirements of a consumer credit contract I will turn to Section 11 CCCFA identifies the requirements. Katie is a natural person and the credit is being used for a personal purpose of purchasing her own home. There has been security in the form of mortgages taken under the contract by the creditors and the creditors are providing Katie with credit which enabled her to purchaser her home. Time of repayment (Early repayment) Katie is wishing to repay her mortgages as soon as possible, indicating this is before the terms as set out as 10/15 years in the credit contracts. There is a general rule that a mortgagee is able to re-pay their debt early Jay v UBS. Under the PLA sections 97 and 98 PLA provide for early repayment. Section 98 PLA specifies the amount secured includes interest for the unexpired portion of the term. This represents Katie is liable to pay the interest for the remaining 7 years as suggested by Kiwi bank. However, as Katies situation may be relevant to the CCCFA as a consumer credit contract, section 100 PLA states that section 98 PLA is subject to part II CCCFA. And therefore section 50 and 51 CCCFA apply. Section 50 represents the debtors right to full prepayment; a creditor must accept full prepayment of a Consumer credit contract from a debtor at any time. Section 51 CCCFA represents the amount required for full repayment including; - Any unpaid balance at the time of the full prepayment - Credit fee to reasonably compensate the mortgagee for any administrative cost - Fee or charge that does not exceed a reasonable estimate of the creditor’s loss arising from the full prepayment Nothing in section 97 or 98 limits section 50 or 51. Kiwi bank Kiwi bank has agreed to Katies request for early repayment as they are obligated to accept under the PLA and CCCFA. If the court finds Katies situation is a consumer credit contract and therefore subject to the requirements of the CCCFA, Kiwi bank is not able to charge Katie the interest for the remaining 7 years as under section 51 CCCFA. Rather, Katie would become subject to section 54 CCCFA to determine a payable amount by Katie for the loss incurred by the creditor due to her prepayment. Factors taken into account to calculate this figure include a) a procedure prescribed for the purposes of this section by regulations; or b) an appropriate procedure set out in the consumer credit contract for calculating that loss. If mortgagee has set out its own procedure (b) – this can be challenged and if it is held to be oppressive or unconscionable credit contract may be re -opened.

Section 50 and 51 make a reasonable solution for both parties so a mortgagor can repay loan and not have to pay an unreasonably high cost to do so. If the court finds Katies scenario to not be one which triggers the CCCFA, Section 98 and 98 of the PLA apply and therefore Kiwi bank must accept full prepayment of Katies debts. However, she is liable to pay for the remaining interest as under section 98 PLA. LLPL The same law applies to Katie when dealing with early repayment of the mortgage with LLPL. However, under the CCCFA Katie may be able to re-open the contract if the seemingly high interest rate of 25% pa is found to be oppressive. Under s 120 of the CCCFA, a court may reopen any credit contract if it is oppressive; a party has (or is about to) exercise a power under the contract in an oppressive manner or; a party has been induced to enter into a contract through oppressive means. Oppressive is described as “harsh, unjustly burdensome, unconscionable or in breach of reasonable standards of commercial practise (s 118). The court may also make any orders it thinks necessary to remedy the matters that caused the court to reopen the contract (s 127). To determine this the courts will likely look towards whether the high interest rate is in breach of commercial standards which are regular for this type of contract. A high interest rate does not immediately mean an oppressive contract Greenbank v Haas, however, the court will consider a number of factors to determine oppression including; intention of the parties, did the parties receive independent legal advice, the purpose of the loan and the relevant commercial standards for this industry. Because the interest rate is significantly higher than that of Kiwi Banks, this may give rise towards the rate being not within the standards of reasonable commercial practice – however this isn’t always the case as a high interest rate may be provided in order to reflect the risk a creditor is undertaking. However, this would require further knowledge of interest rates on mortgages and I would not be able to determine oppression based of just one other rate. It is not mentioned that Katie received legal advice and as her occupation is an engineer it is not expected of her to have sufficient knowledge on mortgage interest rates potentially, also she is a first time home buyer and we are told she was in a rush to purchase suggesting there was a potential bargaining imbalance between the parties. There are potential factors which do give rise to an oppressive contract between Katie and LLPL, meaning it may be re-opened. If the court were to find this contract to be oppressive, they may make an order including potential remedies to a re-opened oppressive credit contract under section 127 CCCFA; however, the courts powers are discretionary here; - Direct party to transfer property to another party - Direct party to pay a sum of money to another - Ask/order a party from refraining to do something

CCCFA question 2 – Money Matters and Kirwee Holdings – Italia holdings The Purpose of part 5 of CCCFA is to protect interests of consumers with credit contracts, consumer leases, and buy-back transactions, provide adequate disclosure and general rules for credit contracts and holds creditors accountable for being responsible. K is seeking relief under the CCCFA 2003 under the order of an oppressive credit contract with MM. It must be determined whether the situation of M and K meets the requirements of a credit contract and therefore relief may be sought by K under the CCCFA. Section 7 CCCFA identifies the requirements of a credit contract; K carries out a business of a property developer who is receiving credit/finances from MM, the purpose of this credit is not relevant as this is not a consumer credit contract under s11. In order for K to seek relief under CCCFA they must be able to provide a reasonable understanding the contract be re-opened under oppressive grounds. The court may re-open this contract under s 120 of the CCCFA, if they find it to be oppressive; a party has (or is about to) exercise a power under the contract in an oppressive manner or; a party has been induced to enter into a contract through oppressive means. Oppressive is described as “harsh, unjustly burdensome, unconscionable or in breach of reasonable standards of commercial practise (s 118). The court may also make any orders it thinks necessary to remedy the matters that caused the court to reopen the contract (s 127). Greenbank V Hast determined the meaning of oppression to be “in breach of reasonable standards of commercial practice” this definition was accepted in Ge Custodians. It may be found that the mortgage condition of purchasing two properties at a greatly inflated price was oppressive or that the interest rate of 20% was oppressive. However, this is not guaranteed under the CCCFA as the court caries a wide scope of discretion and may consider; - “oppressive” being measured in light of circumstances - Relationship of the parties “arms-length” or not - business experience of parties and - purpose of the loan - independent legal advice - what are the reasonable standards of commercial practice – evidence as to the standards relative to the particular type of contract under consideration Here, K did receive independent legal advice from a solicitor on all transactions and as a property developer themselves, it can be assumed they should have extensive knowledge of the property market and therefore significant business experience. The court may look to the reasonable standards of commercial practice in determining whether the interest rate is oppressive or not, however, a high finance rate does not always equal oppression Greenbank v Haas. It is likely the court will find this contract not oppressive under the CCCFA, K will not be able to seek relief and MM’s mortgages will remain on the properties.

Mrs Baker – Robinson v Short Buy back transaction Elderly woman MM knew about financial circumstances claiming they bent over backwards

How to identify where CCCFA is applicable? Section 11 CCCFA sets out the meaning of a consumer credit contract Requirements include - Debtor is a natural person - Credit is used predominantly for personal, domestic or household purposes - Interest charges/credit fees or a security interest (mortgage) are taken under the contract - Creditor carries on the business of providing credit Likely involve – early repayment of a loan - Section 97, 98 PLA - Section 50,51 CCCFA Oppressive contract under CCCFA - Oppressive section 118 meaning oppressive, harsh, unjustly burdensome, unconscionable or in breach of reasonable commercial standards - Breach of commercial standards?...