Call to streamline finance rules
The Financial Services Federation (FSF) has welcomed the “one-size-fits-all” consumer lending regulations being removed by the government but says there’s more to be done to streamline the rules for finance providers.
The FSF, which represents responsible non-bank lenders, explains an over-complicated financial services regulatory system has been allowed to develop over the years.
Lyn McMorran, executive director, says this has led to higher compliance costs for providers and these are inevitably passed onto the customer.
The FSF agrees with Andrew Bayly, Minister of Commerce and Consumer Affairs, that successive governments, albeit with the right intentions, have added layers of compliance requirements on the financial services sector without looking at the overall regulatory framework.
McMorran, pictured, says one example of improving the system is for more work to be done to ensure the government’s plans to move the enforcement of the Credit Contracts and Consumer Finance Act (CCCFA) from the Commerce Commission to the Financial Markets Authority (FMA) will lead to lower compliance costs.
She adds attention should also be put on the personal liability of directors and senior managers of consumer credit providers and the inability to be indemnified – by insurers or others – in respect of any pecuniary penalty imposed under the CCCFA.
“We support fair and robust enforcement penalties, however, this is impacting the risk appetite for lenders and competition to banks, particularly for smaller lenders as a $200,000.00 fine is a substantial personal liability for a director or senior manager of a small finance company,” explains McMorran.
“It’s a deterrent for good people to enter the sector and those already there to put their hand up for senior roles.
“This is not serving New Zealand’s financial services system well, especially when we need to be boosting an environment for competition.”
Her comments came after the minister removed strict affordability regulations from the CCCFA at the end of July to help improve access to credit for consumers.
McMorran notes 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, and there are still penalties for those who breach this principle.
“This still means lenders have robust responsible lending obligations, but the removal of the one-size-fits-all regulations means an ability to use expertise to make measured judgement calls on a case-by case basis, rather than treating all consumers the same,” she adds.
Overall, the FSF says it is pleased the minister is listening to financial services providers’ concerns about the complexity of the regulatory framework and that he is committed to improving it for its members and consumers.
Bayly and Samantha Barrass, FMA chief executive, will be addressing the sector at the FSF conference in Auckland on October 22.
