Nats attack finance law changes
The National Party is worried figures published by credit bureau Centrix confirm new lending regulations are having unintended consequences for borrowers and finance providers.
Centrix’s monthly report shows the rate of approval of loans to borrowers with high credit scores has dropped from more than 45 per cent to nearly 35 per cent since amendments to the Credit Contracts and Consumer Finance Act (CCCFA) have come into effect. In addition, the approval rate for those with low credit scores has remained unchanged.
Andrew Bayly, National’s commerce and consumer affairs spokesman, says that wasn’t the intention of the legislative changes, which were aimed at clamping down on irresponsible lending by high-cost lenders.
He adds: “The act was directed at high-cost lenders. That was the intent – to worry about those people who want to go and charge poor households from 300 per cent interest rates.”
Bayly, pictured, says the amended CCCFA has seen mortgage lending drop, more people being refused credit cards, and big impacts on banks and other registered financial institutions, which were already regulated by the Reserve Bank.
Before the law changes came into force on December 1, the Financial Services Federation warned they would have a perverse effect and make it more difficult for people to borrow from responsible non-bank lenders. The government is reviewing the effects of the legislation and a report on that is due out soon.
Bayly adds one of the problems is that following the law change, the Ministry of Business, Innovation and Employment has rewritten the code and turned it from a 63-page document into one of 105 pages. This was also followed by the Commerce Commission going to banks and other lenders to set out a range of new expectations.
He remains concerned about the prescriptive nature of the rules, saying they spell out to banks how they should assess risk, which is “absolutely absurd”. He says the new regulations make the process more time-consuming and expensive for financial institutions, whose business is assessing risk, reports NBR.
Bayly has sent a draft legislation proposal to David Clark, the Minister for Commerce and Consumer Affairs, making clear the regulations should only be tailored for and directed at high-cost lenders.
