National slams Clark over CCCFA
The National Party has criticised proposed changes to the Credit Contracts and Consumer Finance Act (CCCFA).
Andrew Bayly, its spokesman for commerce and consumer affairs, claims the government’s one-size-fits-all approach, which resulted from changes that came in on December 1, have created too much red tape for borrowers and banks.
Bayly, pictured, says the CCCFA amendments were never meant to capture banks and credit unions, but David Clark, the Minister of Commerce and Consumer Affairs, chose to issue “highly prescriptive” regulations for all types of lenders.
He says this was a “crucial mistake” made by Clark and the minister’s changes to the system, which were announced on March 11, still fail to recognise a “fundamental difference” between highly regulated finance providers and high-cost lenders servicing vulnerable clients.
Bayly adds National has drafted a member’s bill that would have fixed the problem by requiring the minister to issue separate regulations for different types of lenders.
However, Clark declined to take this up and has now offered some “minor tweaks” that were unlikely to fix the problems people face, Instead, Bayly says he has put off making real change until a review reports back in April.
The minister’s announcement of March 11 includes “the government making practical amendments to responsible lending rules to curb any unintended consequences being caused by the CCCFA”. These include:
• Clarifying that when borrowers provide detailed breakdown of future living expenses there’s no need to inquire into current living expenses from recent bank transactions.
• Removal of regular “savings” and “investments” as examples of outgoings lenders need to inquire into.
• Clarifying the requirement to obtain information in “sufficient detail” only relates to information provided by borrowers directly rather than relating to information from bank transaction records.
• Providing alternative guidance and examples for when it’s “obvious” a loan is affordable.
“Following my meetings with the banks to hear their concerns, I detected little enthusiasm for wholesale changes to the act but a preference for some practical amendments to be made to ensure the purposes of the legislation are best met,” says Clark.
“Meanwhile, a broader investigation, led by MBIE and the Council of Financial Regulators, into the early implementation of the CCCFA amendments is ongoing.
“Thus far, investigations have thrown up no reasons to believe the CCCFA is the main driver in reduced lending. The Reserve Bank’s December figures highlight seasonal variation as a prominent contributor. In fact, December 2021 was still above trends from the same month in 2017, 2018 and 2019.
“It is also important to note banks may be managing lending more conservatively, likely due to global economic conditions. A number of factors affecting the market have occurred at the same time as the CCCFA changes, including increases to the OCR, LVR changes, and an increase in house prices and local government rates.
“The changes 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.”
Financial Advice NZ, which represents financial advisers, is pleased with Clark’s changes. Chief executive Katrina Shanks says mortgage advisers have reported a significant drop in pre-approved mortgage finance being renewed after the new rules had come into effect in December.
“It’s important the minister acts with speed to implement changes announced so Kiwis who have the ability to service credit are able to access it,” she adds.
She says Financial Advice NZ has always supported protecting vulnerable borrowers, but the CCCFA’s intention was not to reduce the availability of credit to people who were not vulnerable. That had been “an unintended consequence”.
