FSF backs CCCFA changes
Reforms to lending laws announced by the government have been welcomed by the Financial Services Federation (FSF).
The organisation, which represents non-banking lenders including many in the automotive industry, describes the changes as a “welcome return to common sense”.
The FSF adds the overhaul will make credit more accessible for all New Zealand consumers.
The changes to the Credit Contracts and Consumer Finance Act (CCCFA) were announced by Andrew Bayly, Minister of Commerce and Consumer Affairs, and Chris Bishop, Minister of Housing, on April 21.
Lyn McMorran, the FSF’s executive director, says: “The announcement that overly prescriptive affordability assessment regulations are to be revoked will make obtaining credit for all purposes, including to purchase a home and to access small personal loans for situations like car repairs, easier and less intrusive for all consumers.
“FSF members stand for the responsible provision of credit. We have been fully supportive of some of the changes to the CCCFA, such as defining in the law a high-cost loan and placing limits around the amount that can be charged in interest and fees under such loan contracts.
“However, the affordability regulations required lenders to examine borrowers’ expenditure to such a granular level that responsible lenders were often unable to assist consumers in need of access to finance.
“They effectively treated every borrower as being in vulnerable circumstances even when clearly they were not.”
McMorran, pictured, adds there has been a significant increase in responsible lenders having to decline loan applications from consumers whom they would have been able to assist before the affordability regulations were introduced in December 2021.
“This has been particularly concerning to FSF members as borrower’s needs have not disappeared just because a lender is unable to assist them,” adds McMorran.
The federation agrees with Bayly that the alternative for these people is to seek credit from loan sharks.
“For those consumers who were still able to demonstrate they could meet the onerous affordability criteria, the process to access credit was very time-consuming and questioning as to how they spend their money intrusive. These changes will be welcomed by all consumers seeking access to credit.”
The FSF does not believe that the government’s changes will open the floodgates to irresponsible lending.
“This is because the CCCFA still requires lenders to abide by the principle that they will not lend to people who cannot afford to make the repayments without substantial hardship. There are still substantial penalties for lenders breaching this principle.”
The federation notes Bayly will be consulting further on a range of other reforms to financial services over the coming weeks, and looks forward to working further with him to ensure good financial outcomes for New Zealanders.
The FSF is the industry association representing non-bank lenders committed to responsible lending and supporting consumers and businesses through innovation and competition. Its members help finance 1.7 million Kiwis and $17 billion in lending.
