New Zealand's CoFI regime launches to enhance consumer protection
The implementation of the Conduct of Financial Institutions (CoFI) regime has just commenced, ushering in a new era of consumer-focused practices in New Zealand’s financial industry.
Overseen by the Financial Markets Authority, this new framework mandates banks, insurers, and non-bank deposit takers to prioritise the interests of New Zealand consumers in their operations.
FMA emphasises fair treatment
Michael Hewes (pictured), FMA’s director of deposit taking, insurance, and advice, elaborated on the essence of CoFI.
“CoFI is fundamentally about treating customers and potential customers fairly – this is the fair conduct principle,” Hewes said. “We expect financial institutions to be analysing how their products are performing, communicating effectively with consumers, and acting quickly if something is not working as it should be.”
Requirements for financial institutions
Under CoFI, all regulated financial institutions must now establish, maintain, and implement a robust fair conduct program. This program is crucial for ensuring adherence to the fair conduct principle, with a requirement to publicly display a summary on their websites.
This transparency aims to help consumers understand their rights and the standards of treatment they should expect from financial service providers.
Ongoing supervision and licensing
FMA’s oversight under the CoFI regime will employ a comprehensive suite of regulatory tools, including engagement meetings, monitoring reviews, and thematic reviews across the financial sector.
“Our focus will be on the outcome of financial institutions treating consumers fairly, while giving firms flexibility, where appropriate, with how they achieve this,” FMA said.
As of March 31, FMA has successfully licensed 77 entities, including 17 banks, 46 insurers, and 14 non-bank deposit takers.
Regulatory reviews trigger CoFI implementation and customer refunds
The CoFI regime was spurred by joint conduct and culture reviews by FMA and the Reserve Bank during 2018 and 2019, which examined banks and insurers.
These reviews, which led to the Financial Markets (Conduct of Institutions) Amendment Act 2022, identified significant consumer harm, resulting in more than $215 million being returned to customers due to unapplied discounts and overcharged fees.
Anticipated outcomes for consumers
FMA anticipates that CoFI will ensure New Zealanders have timely access to the financial products and services they need, with confidence in their performance and suitability.
“New Zealanders should have access to the financial products and services they need, when they need them, and have trust and confidence that products and services will perform as expected and meet their needs. We expect CoFI to achieve that,” FMA said.
