The changes may not be enough to make a difference to borrowers, banks say
Commerce and Consumer Affairs Minister David Clark announced a range of tweaks to the Credit Contracts and Consumer Finance Act (CCCFA) last week – changes that a group representing New Zealand’s banks said may not move the dial enough to make a difference to borrowers.
The changes came just four months after the stricter lending rules came into effect on Dec. 1, prompting complaints from consumers and mortgage brokers frustrated that loan applications were getting rejected due to spending habits like takeaways, going to the pub, or seeing a counsellor.
This led to more than 10,000 people signing a petition against the law changes and the government announcing at the end of January it would review them. Just last week, Clark said it was making practical amendments to curb any unintended consequences of the act.
“The amendments we are making are informed by the feedback I received from banks, other lenders and consumers and sit comfortably within the intent of the act,” Clark told NZ Herald. “These initial changes ensure borrower-ready Kiwis can still access credit while we continue to protect those most at risk from predatory and irresponsible lending. There is no question that the banks, budget advisers, and [the] government are all on the same page when it comes to supporting the intention of the law – we want to stop vulnerable people from finding themselves with unaffordable debt.”
The changes include:
- clarifying that when borrowers provide a detailed breakdown of future living expenses there is no need to inquire into current living expenses from recent bank transactions
- removal of regular “savings” and “investments” as examples of outgoings that lenders need to inquire into
- clarifying that the requirement to obtain information in "sufficient detail" only relates to information provided by borrowers directly rather than relating to information from bank transaction records
- providing alternative guidance and examples for when it is "obvious" that a loan is affordable
Roger Beaumont, chief executive of the New Zealand Bankers' Association, said that while the government “identified some of the main pain points for consumers,” ’it is “not clear the changes … will move the dial enough to make a difference,” NZ Herald reported.
He said more could be done to reduce the impact on most consumers while at the same time protecting vulnerable consumers.
“We'd like to see the new rules work in a way that doesn't restrict access to responsible lending for consumers who can afford it, while ensuring vulnerable consumers are protected from high-cost credit that may not suit their circumstances,” he told the publication. “These changes maintain the one-size fits all approach that hasn't worked so far. More detail is needed to see how the changes will actually work.”
Beaumont said the range of benchmarked expenses was very limited and the regulations still required lenders to collect detailed information on outgoings.
A spokesman for Clark confirmed the changes would come into effect in early June after a brief consultation period between stakeholders and Ministry of Business, Innovation and Employment to work out the practicalities of the changes. Meanwhile, a broader investigation led by MBIE and the Council of Financial Regulators into the CCFA amendments was still ongoing, NZ Herald reported.
