Credit rule changes closer
The government says it is a step closer to making reforms to the Credit Contracts and Consumer Finance Act (CCCFA) that will make it simpler for New Zealanders to access credit.
It comes after a select committee examined the Credit Contracts and Consumer Finance Amendment Bill, which was introduced to parliament in March this year, and has recommended by majority that it be passed.
The bill, which affects motor-vehicle finance providers and agents, will transfer regulatory responsibility for credit contracts and consumer finance from the Commerce Commission to the Financial Markets Authority.
The shake-up will also result in lenders shifting from a certification to a licensing regime and remove parts of the CCCFA, such as the due diligence duty for directors and senior managers, that do not fit with the new regulatory approach.
Scott Simpson, Minister of Commerce and Consumer Affairs, says the bill’s reforms will restore common sense to lending, reduce unnecessary red tape and ensure responsible borrowers can access finance when they need it.
“Previous changes saw banks and other lenders weighed down by excessive compliance requirements. That led to an overly cautious approach to lending, making it harder for Kiwis to access affordable credit,” adds Simpson, pictured.
“Many will remember the frustration of being asked intrusive questions about everyday expenses such as takeaways or streaming subscriptions when applying for a home loan. That is why the Government acted to remove unnecessary rules, bring back common sense and make it easier for responsible borrowers to access finance.”
He notes the bill, which will need to pass a second and third reading in parliament before becoming law, also simplifies the regulatory framework to reduce compliance costs for businesses.
Many lenders currently face oversight from three separate regulators, the Financial Markets Authority, the Commerce Commission and the Reserve Bank.
“This can be unnecessarily complex and confusing, and these changes will streamline that system,” he says.
“Another important change removes personal liability for directors and senior managers over minor administrative mistakes. That provision was discouraging capable people from taking up governance roles and added to the regulatory burden faced by lenders.
“These reforms are part of the government’s wider financial services reform package, which is focused on creating a more dynamic, fair and accessible financial system for all New Zealanders.”
Other parts of the government’s financial services reforms are the Financial Markets Conduct Amendment Bill and the Financial Service Providers (Registration and Dispute Resolution) Amendment Bill.
Together, the government says the three bills will overhaul legislation related to finance and ensure consumer protection without stifling access to credit or innovation.
Simpson thanked the finance and expenditure select committee for the work it has done on the CCCF Amendment Bill and those who took the time to make submissions.
“As a result of the feedback received, the committee has recommended a number of changes, which the government parties will accept. This includes adjustments to the retrospective element of the legislation,” he explains.
“While retrospective law change is unusual, in this case I believe it is justified. The intent has always been to fix bad law and ensure the courts have the discretion to reach fair and equitable outcomes.”
“Through the select committee process, it was suggested that ongoing court cases be exempt from these provisions. The committee considered this carefully and recommended that approach, and the government parties agree.
“There has been significant attention on the retrospective element of the bill, which has at times overshadowed the broader purpose of these reforms. Ultimately, this legislation is about improving access to credit and reducing unnecessary red tape for both lenders and consumers.”
