CEO calls for change to the legislation in relation to the penalties and liability regime
Commerce and Consumer Affairs Minister David Clark recently announced plans to further relax rules under the Credit Contracts and Consumer Finance Act (CCCFA), but two organisations want to see more action from the government.
Read more: Consumer lending rules to further relax
Clark’s announcement marks the second tranche of tweaks since the new regulations and a Responsible Lending Code came into force on Dec. 1, 2021, and was met with loud and wide criticism for being overly prescriptive and too heavy-handed. The changes will be implemented in March 2023.
Read next: Government changes to CCCFA locked in
But Tim Kearins, owner of Century 21 New Zealand, said that while it is encouraging that the government is prepared to make changes to the consumer lending rules, the hurdles remain too high for many Kiwis seeking a mortgage.
“We all agree with moves to hit loan sharks who target vulnerable borrowers,” Kearins said. “However, increasing numbers of financial experts, banks, brokers, and homebuyers continue to get hit by a very broad brush the government is applying to all loan applications. It’s a shame because many very backable young Kiwis, with solid incomes, are missing out on property purchases just when a softening market is creating great opportunities for them.”
Kearins is now urging the government to review the consumer lending rules’ impact on mortgage applications and make further changes if required.
“Banks have consistently advised that 10% of all loans they would’ve once been approved are now getting declined,” Kearins said. “That number needs to fall, and if it doesn't, more clarification and changes must be made by the government. The last thing the country needs is a near-impossible lending environment.”
Financial Advice NZ chief executive Katrina Shanks said FANZ is supportive of the areas identified for change. She noted, however, that the changes “require more consultation” and that the “gap is too long” between when the unintended consequences of the CCCFA were identified and the changes’ implementation in March 2023.
“The potential changes identified in the report will make some difference, such as the need to be more targeted to specific kinds of lending and lenders, or certain consumers where there is a higher underlying risk of substantial hardship,” Shanks said. “We believe to move the dial significantly, a change has to be made to the legislation in relation to the penalties and liability regime. This would reduce the onerousness of due diligence duties of directors and senior managers the December 2021 legislation created. The potential change to ‘narrow’ expenses considered by lenders is positive. We are also encouraged to see proposals to relax some assumptions that lenders are required to make about buy now, pay later and credit cards. Changes helping make debt consolidation more accessible if appropriate for borrowers is also a step in the right direction.”
