But the emergency move has infuriated non-bank finance companies – here's why
Emergency lending law regulations have been passed to enable banks to make loans to Kiwis who are in desperate need of cash due to the recent wild weather events.
Under the new regulations, banks and other mortgage lenders can extend home loans by up to $10,000, as well emergency overdrafts of up to $10,000 for existing customers who were impacted by the January and February weather events, both without first having to do affordability assessments
The regulations only cover loan applications from those who are “experiencing, or reasonably expect to experience” negative effects of weather-related damage in the upper North Island in January and February, Stuff reported.
The regulations were implemented as it would be “unduly onerous and burdensome” for lenders to have to run affordability assessments when lending was urgently needed by flood victims.
The regulations will take effect until the end of March.
Banks have all been offering financial support packages for customers, who have suffered during the extreme weather battering the country since late in January, including overdrafts and temporary reductions in home loan repayments.
ANZ said it had simplified some of its processes, like temporary overdrafts, for customers with insurance, and for those applying for a KiwiSaver significant hardship withdrawal for amounts up to $5,000.
“There are also a number of fee waivers in place, as well as the ability for customers in hardship to break term deposits,” the country’s largest bank said.
Non-bank finance firms were outraged by the emergency loan regulations, however, because they were excluded as most were not mortgage lenders, and because they do not offer transaction accounts and could not offer overdrafts.
Financial Services Federation’s Lyn McMorran lobbied for finance firms to be included in the emergency regulations.
“The decision not to extend the exemptions to personal loans or other credit products at this time will restrict relief for people who will be really needing it,” McMorran told the news agency.
The regulations, she said, were biased towards the “lucky people” who had a mortgage on their own homes.
McMorran said many people would be looking to replace flood-damaged cars, furniture, and whiteware – purchases which could not be funded using home loans and overdrafts.
She also noted that around half of all loans for cars and household goods were provided by non-bank finance companies.
Overdraft rates vary across banks, but ANZ charges 18.9% interest on its overdrafts, provided that people remain within their overdraft limit, while Westpac charges 19.95%.
McMorran said tightening of responsible lending regulations in December 2021 still has negative effects, making it tough for finance firms to offer loans to flood victims who urgently needed the money.
“The idea that lenders have to get statutory relief to assist customers in an emergency, suggests the law is fundamentally flawed, and more needs to be done to get this right for New Zealand consumers,” McMorran told Stuff.
What do you think about the new lending regulations? We’d love to hear from you in the comments below.
