Update provides faster access to credit
The Credit Contracts and Consumer Finance Act has been updated to help borrowers impacted by recent weather events to access up to $10,000 in short-term funding more quickly.
Under the CCCFA, an exemption applies to home loan top-ups and temporary overdrafts (up to 12 months) issued before March 31, the New Zealand government has confirmed. It is available to existing customers affected by the flooding in January and February, currently limited to those living in the Upper North Island.
News of the amendment to the CCCFA was released earlier this week, when the Financial Services Federation issued a media release criticising the scope of the exemption. Unlike personal loans, home loans and overdrafts do not amortise over a specified term, meaning borrowers are potentially on the hook to pay compounding interest for longer, it said.
In a statement released on Thursday morning, Minister of Commerce and Consumer Affairs Duncan Webb (pictured above) confirmed that a temporary exemption is underway. It would allow banks and other lenders to provide credit to consumers in financial difficulty, without the need for extensive enquiries regarding repayment of debt.
“We’ve worked closely with the sector on this exemption so consumers can expect to access credit more easily in the coming days,” Webb said.
While the exemption does not cap interest rates or fees, Webb said he had asked the banking sector for assurance that interest rates would be at usual, or possibly lower rates.
“So far the response has been positive with one bank indicating their overdrafts will be interest free,” Webb said.
Webb confirmed that the exemption covers all lenders providing overdrafts or home loans, including banks, building societies, credit unions and other non-bank deposit-takers.
Bluestone head of sales NZ Sue Griffiths (pictured above right) told NZ Adviser that while she commended the exemption, the $10,000 limit fell short of financial relief provided during the COVID-19 pandemic.
“I’m not sure $10,000 is enough … I think they can go further than that, I think they did more than this with COVID – I feel this is more urgent,” Griffiths said.
“We will definitely be supporting and helping those affected customers as much as we can … we ask them to phone us or go straight to their financial adviser.”
Support under the CCCFA exemption reinforces other government relief to people affected by the Auckland Anniversary flooding and Cyclone Gabrielle, such as that through the Mayoral Relief Fund. Additionally, Auckland Business Chamber is one of the organisations assisting with distribution of the Government’s $5m emergency support package to help flood-impacted businesses.
