Lending changes to kick in

The government has announced a second set of changes to the Credit Contracts and Consumer Finance Regulations and responsible lending code.

It says they aim to increase ease of access to credit while maintaining a strong level of consumer protection.

The changes will be applied from May 4. Together with the initial changes that came into effect in July 2022, those announced on April 6 will address the unintended impacts of December 2021’s amendments to the Credit Contracts and Consumer Finance Act (CCCFA) and the regulations.

The Ministry of Business, Innovation and Employment (MBIE) released an exposure draft of the changes to the regulations and code for consultation in September 2022. These were then amended to reflect feedback received from lenders, financial mentors and consumer advocates during the consultation period. “The feedback was an important step to ensure the workability of the final changes,” it says.

What are the changes?

• Narrowing the ranges of expenses lenders have to consider.
Discretionary expenses will be explicitly excluded from the definition of “listed outgoings”. Chapter five of the responsible lending code provides extra guidance on which expenses are essential or non-discretionary.

• More flexibility about how certain repayments may be calculated.
Lenders have more flexibility about how they estimate expenses associated with revolving buy-now, pay-later (BNPL) contracts. The code provides guidance on what factors lenders should consider when estimating a borrower’s expenses from existing BNPL contracts as part of the affordability assessment.

• Expanding exceptions from a full income and expense assessment when refinancing existing contracts.
Lenders do not need to carry out a full income and expense assessment when refinancing some existing credit contracts borrowers have with other lenders. The amendments allow for debt refinancing or consolidation when annual interest rate or regular repayments are equal to or lower than under the borrower’s current loans. The code provides extra guidance on the use of the new refinancing exception to improve consumer protection and informed decision making.

More information

• The amendment regulations have been posted on the legislation website: https://www.legislation.govt.nz/regulation/public/2023/0047/latest/LMS824806.html.

• The updated responsible lending code has been published on MBIE’s website: https://www.mbie.govt.nz/dmsdocument/26304-responsible-lending-code-april-2023.

• The minister’s recent announcement concerning the further changes: Government takes further steps in improving safe access to credit | Beehive.govt.nz

• The Cabinet Legislation Committee paper can be viewed on the MBIE website: https://www.mbie.govt.nz/dmsdocument/26311-credit-contracts-and-consumer-finance-amendment-regulations-2023-cabinet-paper-proactiverelease-pdf.

• Further details on the investigation and changes can be viewed on MBIE’s site: https://www.mbie.govt.nz/business-and-employment/consumer-protection/review-of-consumer-credit-law/review-of-december-2021-credit-law-changes.

Email consumer@mbie.govt.nz if you have any questions about the CCCFA changes.