Credit Contracts

Consumer credit contracts (broadly defined as credit contracts that are "primarily for personal, domestic or household purposes", where the debtor is a "natural person" and the creditor makes a practice of "providing credit in the course of business", "charging interest", "credit fees" or taking a "security interest") are closely controlled by the Credit Contracts and Consumer Finance Act 2003. Thus credit cards, car hire purchase agreements, mortgages over residential properties and personal loans all fall within the ambit of the Credit Contracts and Consumer Finance Act 2003.

The Act acts as a powerful protection to credit consumers.

Nevertheless, you should be especially cautious if entering into a buy-back arrangement involving your home. A buy-back transaction is an arrangement where a property owner (occupier), sells their home to a "transferee", but retains a right to live in the home for a specific period after the sale.

The buy-back contract may involve under-stated or over-inflated sale and purchase values, making it difficult for the occupier to re-purchase the property on the buy-back date.

If a lender purchases your home on the basis of you paying rent and at some specified future time re-purchasing your home from the lender (provided that you have met all of the conditions of the loan), but also insists on you forming a family trust to which you are encouraged to 'sell' your home (and which trust then enters into a sale and purchase agreement with the lender) - beware.

The "natural person" limitation in the Act excludes natural persons who are acting as trustees for their family trusts. If an unscrupulous lender attempts to persuade you to form a trust to which your home is to be sold prior to selling the home to the lender, make sure that you talk with Rennie Cox about the risks associated with this, and how you can best minimise any exposure to the risk of losing your home.