MIA backs finance law changes
The new-vehicle industry has welcomed a decision by the government to make changes to finance legislation that has impacted on loan-approval rates and car sales.
David Crawford, chief executive of the Motor Industry Association (MIA), has praised the Minister of Commerce and Consumer Affairs for taking action over the “unintended consequences” of amendments to the Credit Contracts and Consumer Finance Act (CCCFA), which came into force at the start of December.
That said, “we would prefer the government didn’t get these sorts of things wrong in the first place”, he remarks. Crawford adds David Clark’s announcement of March 11 on the changes will alleviate some of the constraints on consumers when they want to take out loans because of the focus there has been on their spending habits.
“With some 40 to 45 per cent of new vehicles being private sales, these changes announced by the minister will certainly make getting loans easier and selling cars easier as well,” Crawford told Autofile Online.
“Anecdotally, the MIA has heard of quite a few finance deals falling over or being turned down. The changes that have been announced will go some way to addressing the problems and we welcome them.
“Some people criticised the government for getting this wrong in the first place, and they did get it wrong, but we should compliment it for realising this. It has now moved to address unintended consequences, although we would prefer it didn’t get these things wrong in the first place.”
Crawford notes one of the main issues created by December’s amendments to the CCCFA has been the legal obligation on finance providers to look at applicants’ expenditure patterns to see if they can afford loans in order to get finance. “However, we got to the silly situation where people could afford the loan, but couldn’t actually get the finance.”
Clark’s changes include clarifying that when borrowers provide detailed breakdown of future living expenses that there’s no need to inquire into their current living expenses from recent bank transactions, and removing regular “savings” and “investments” as examples of outgoings finance providers needs to ask about.
Also being clarified is the requirement for lenders to obtain information in “sufficient detail” relating to what is provided by their clients directly rather than relating to information from bank records, while alternative guidance and examples will be defined for when it’s “obvious” a loan is affordable.
Clark says a “broader investigation”, which is being led by the Council of Financial Regulators and Ministry of Business, Innovation and Employment, into the early implementation of the CCCFA amendments is ongoing.
The minister adds his changes as announced “are not the final word – any further changes to credit laws and the responsible lending code will be considered as part of the remainder of the investigation due next month”.
In the February issue of Autofile magazine, Crawford said the MIA had heard of loan-approval rates dropping by between 50 and 90 per cent. He added some members were struggling to meet the regulations with more admin requirements required to run finance – from distributors to dealerships.
“There’s a lot more administration work and with the risk of getting it wrong comes substantial penalties,” he warned. “In addition, the risk of selling finance has gone up from the lender’s side.
“Vehicle purchasers are finding it more difficult to get a loan, especially with their spending habits under extra scrutiny. Dealers are needing to have awkward discussions, which can come across as if they don’t trust their customers. Would-be buyers have just been walking away because it’s all too difficult.”
