Dealers risk dipping out as laws change
The Motor Trade Association (MTA) has voiced concern dealers will potentially end up “running at reduced capacity” for six months because of changes set to be made to lending laws soon after they were introduced.
It notes the government’s plans to tweak the Credit Contracts and Consumer Finance Act (CCCFA), which came into force from December 1, appears to be good news but any amendments are unlikely to be enacted before June.
David Clark, Minister of Commerce and Consumer Affairs, announced proposals on March 11 to adjust the regulations following an outcry from finance companies and banks as loan approvals tumbled under the new legislation.
Tony Everett, MTA’s sector manager – dealers, says: “The fact that the minister has already signalled changes are needed means there has been acceptance that problems do indeed exist. Let’s take some positive from that.
“It will take a few more months for the minister’s proposed changes to come into effect, which means we will have potentially been running on reduced capacity for nearly half a year.
“Not great for either side in this period of significant market turbulence.
“Hopefully the minister’s changes will address the problems, and not just serve to tinker around the edges, pending yet another review at some point in the future.”
Clark’s proposals will mean lenders have to take a less forensic approach to assessing a borrowers’ ability to make repayments than under the current CCCFA regime.
He describes his plans as practical amendments to ensure the purposes of the legislation are best met.
A broader investigation led by the Ministry of Business, Innovation and Employment and the Council of Financial Regulators into the CCCFA updates introduced in December is also ongoing and due to report to the minister in April.
Everett, pictured, says it is disappointing the government went ahead with the CCCFA amendments in December despite being warned by the industry the new rules would be problematic.
“Within a week people were squawking,” he explains. “If it was so obvious to industry – and they called it out – why did the officials not see it?
“Normally you’d expect months to go by for unintended consequences to be exposed but in this case the problems were evident immediately.
“You have to wonder how we got to this point – is there that much of a disconnect between officials and industry? It would seem so.”
Everett adds New Zealand even had the opportunity to learn from events in Australia when officials across the ditch tried to adjust its finance laws along similar lines a few years ago.
Regulations in Australia were changed to steer banks away from using benchmarks to assess people’s ability to repay in favour of forensic examination of income and expenses.
However, the regulatory changes were rolled back following a federal court judge casting doubt on the push for tougher examinations of a consumer’s expenses.
