Law offers quake-hit debtors hardship relief

Consumers struggling with loan repayments as a result of the Canterbury earthquake may be able to use a consumer law to get financial relief from “unforeseen hardship”.

“Under the Credit Contracts and Consumer Finance Act, in certain circumstances debtors have the right to ask for a variation of their repayment obligations under a consumer credit contract on the grounds of hardship,” said Graham Gill, Commerce Commission enforcement branch manager.

This provision may provide temporary financial relief to debtors struggling to make personal loan, mortgage, credit card or other consumer credit repayments as a result of unforeseen events.

These events include losing your job or having a reduction in working hours.

The provision may also be used by debtors who face an increase in costs as a result of an unforeseen event such as making mortgage payments and also covering the costs of temporary accommodation while earthquake damage to their homes is fixed.

There are some limitations to applying for hardship. Importantly, debtors must be up to date with repayments at the time the application is made.

“The Commerce Commission expects that more consumers will make applications to creditors under the unforeseen hardship provisions as a result of the financial impact of the earthquakes.

We encourage businesses providing credit to educate themselves about the hardship provisions, so they can deal with these applications appropriately”, said Mr Gill.

“It is important that creditors provide correct information about debtors’ rights when they are asked, or they risk breaching the Fair Trading Act.”