The changes will take effect in March 2023
The government has unveiled plans to further relax rules under Credit Contracts and Consumer Finance Act (CCCFA) in a move Commerce and Consumer Affairs Minister David Clark was confident would strike a balance between maintaining a strong level of consumer protection and ensuring people have access to credit.
The lending rules were first tweaked just four months after they came into effect in December following a barrage of complaints that they made it difficult for people to get loans, locking would-be homeowners out of the property market.
Read more: Government tweaks controversial CCCFA lending laws
The second tranche of tweaks to CCCFA include narrowing the expenses considered by lenders to more explicitly exclude discretionary expenses; reducing ‘double counting’ of expenses associated with revolving credit contracts such as credit cards and buy-now-pay-later schemes; and helping make debt refinancing or debt consolidation more accessible if appropriate for borrowers, NZ Herald reported.
The Ministry of Business Innovation and Employment (MBIE) will consult on the finer details of the changes prior to them taking effect in March 2023.
Read next: Government changes to CCCFA locked in
The latest set of clarifications will assist banks and lenders with some of the more technical aspects of the legislation, Clark said.
The minister recognised that some “unintended consequences” resulting from the CCCFA changes have emerged, including borrowers that should pass affordability tests being declined, and borrowers being subjected to “unnecessary or disproportionate inquiries that are perceived by them as being intrusive.”
Clark junked a recommendation from the Council of Financial Regulators, however, to amend affordability regulations to better target specific kinds of lending, lenders, or certain consumers where there is a higher underlying risk of substantial hardship, NZ Herald reported.
Clark said that while the council acknowledged the impact of the CCCFA regulations to home lending, other factors such as LVR restrictions, increased interest rates, inflation and a general property market slowdown also contributed to declines in home lending.
“On the other hand, financial mentors are reporting they are now better able to identify and report irresponsible lending, and there has been an increase in referrals to financial helpline MoneyTalks,” he told the publication. “I’m also advised lenders are further refining their processes and consumers are becoming more familiar with the new requirements.”
The council concluded, however, that it was still too early to say whether or not the CCCFA changes were likely to be successful in achieving their main desired impacts and objectives.
It said, “MBIE has collected a baseline of evidence (including survey evidence and data from financial mentoring services) that is expected to provide a stronger basis for drawing conclusions about the extent of the expected outcomes of the CCCFA changes are realised two–three years from implementation,” NZ Herald reported.
