Lending regulations ease
Strict affordability regulations in the Credit Contracts and Consumer Finance Act (CCCFA), described by the government as arduous and overly prescriptive, have been removed from legislation.
Andrew Bayly, Minister of Commerce and Consumer Affairs, says the change to the rules affecting lenders, including vehicle finance providers, came into effect on July 31.
“Eleven pages of overly prescriptive affordability regulations will no longer be part of the CCCFA in a move that will enable Kiwis to access finance with greater ease and confidence,” he adds.
“The affordability regulations stipulated very specific requirements a customer had to satisfy before being able to take out a loan. The hoops customers had to jump through resulted in a confusing and stressful process.
“Not only was it inefficient and frustrating for customers, but it also significantly increased the burden of compliance, leading to increased costs for lenders.”
Bayly, pictured, says removing the affordability regulations fulfils part of the National-Act coalition agreement, which commits to rewriting the CCCFA to protect vulnerable consumers without unnecessarily limiting access to credit.
The government says the rules, introduced in December 2021, meant potential borrowers had to explain why they bought an occasional coffee or occasionally treated the family to fish and chips, “even when they could clearly afford to”.
“In place of the prescriptive requirements, we have updated the responsible lending code to provide guidance for lenders on how to make reasonable inquiries to assess the affordability of a loan,” Bayly continues.
“The updated responsible lending code manages the risk of unaffordable lending while providing lenders with flexibility to assess affordability on a case-by-case basis, taking into consideration individual circumstances.
“We consulted with lenders and budgeting services as part of the changes, and many lenders are supportive, having seen firsthand the perverse outcomes that the prescriptive requirements had.”
He notes lenders must continue to properly assess consumers’ affordability and make reasonable inquiries, with penalties for those who fail to do so.
