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Page last updated: 01 July 2026

Assessing for affordability

Lender responsibilities

When providing consumer credit lenders must comply with the lender responsibility principles in the Credit Contracts and Consumer Finance Act 2003 (CCCF Act).

These include that a lender must, before entering into an agreement with a borrower, or making a material change to an existing agreement, make reasonable inquiries to be satisfied that it is likely that the borrower will make the payment under the agreement without suffering substantial hardship (i.e. that the loan is affordable for the borrower).

Revised Responsible Lending Code guidance

  • Lenders must comply with the lender responsibility to assess that loans are likely affordable.
  • A revised version of the Responsible Lending Code (Code) came into effect on 31 July 2024. This contains updated guidance in chapter 5 about how lenders may comply with the obligation to assess loan affordability. The Code is not binding but if lenders can show they have complied with the Code, this can be taken as evidence of a lender’s compliance with its responsible lending obligations. Lenders should become familiar with the revised Code and seek specialist legal advice to understand its application to their business.
  • The Code is prepared by the Ministry of Business Innovation and Employment.

Read the Responsible Lending Code [PDF]

Record keeping

Lenders must make and keep records that show how they have met their responsible lending obligations. These records need to show the inquiries made, and how the lender has satisfied themselves that a loan is likely to be affordable for a borrower.

If asked, lenders must make copies of these records available to the FMA, or to any borrower, free of charge and within specified timeframes.

Guidance to assist lenders in complying with the record keeping requirement in section 9CA of the CCCF Act relating to affordability assessments for borrowers and guarantors was developed by the Commerce Commission when it was the regulator. This guidance is not law, but a view given by the regulator of the CCCF Act (now FMA).

This guidance draws from the content of the Lender Responsibility Principles and Chapter 5 of the Responsible Lending Code.

Download Record Keeping Guidance – affordability assessments for borrowers and guarantors [762KB]

Consequences of non-compliance

Breaches of the Lender Responsibility Principles are subject to civil pecuniary penalties up to $600,000 for a company and $200,000 for an individual, plus statutory damages equal to the cost of borrowing (interest and fees charged to the borrower). Failure to comply with the regulations will result in a breach of the relevant lender responsibility principle, resulting in potential liability for these penalties.

Affordability regulations revoked with effect from 31 July 2024

Between 1 December 2021 and 30 July 2024 lenders also needed to comply with regulations relating to affordability in the Credit Contracts and Consumer Finance Regulations 2004 (CCCF Regulations).

The CCCF Regulations required lenders to, before agreeing to lend money to a borrower (or agreeing to lend more money under an existing loan), make specific inquiries in order to assess the borrower’s income and expenses to be satisfied that the repayments are not likely to cause substantial hardship to the borrower.

With effect from 31 July 2024 the regulations relating to the assessment of likelihood of substantial hardship are revoked (regulations 4AC to 4AN). Regulation 4AO relating to high cost consumer credit contracts remains in effect.