Growing calls to overhaul Responsible Lending Code

A growing chorus of mortgage advisers want New Zealand to follow Australia's lead and scrap responsible lending laws.

Tuesday, September 29th 2020, 9:58AM 2 Comments

After Australian treasurer Josh Frydenberg revised the nation's responsible lending laws on Friday, Kiwi mortgage brokers believe authorities here should do the same. 

Australia has changed the rules to stimulate lending and the wider economy in the wake of Covid-19.

NZ's Responsible Lending Code, which came into effect in 2015, forces lenders to abide by responsible lending principles.

Advisers say the Code has made banks reject sound mortgage applications, causing turmoil for clients.

In the wake of Australia's decision, advisers have called on NZ to follow suit. 

TMM Online canvassed the opinion of brokers across the mortgage market. 

Mortgage People's Martin Thomas said: "Obviously the Code will have to be reviewed here as well, with the resultant relaxation removing the “crutch” many lenders have been forced to lean on when making decisions regarding the provision of credit to borrowers outside of the current credit-inspired model.

"Hopefully, we can move back to assessing the borrower in the primary instance and his or her “numbers” in the latter. When I first joined the banking industry in 1971, we were taught “it’s all about the borrower” and I don’t think that mantra’s been evident for many years due to regulatory demands on the bank."

Andrew Dunning of Merx Business Property Loans and Investments, would like to see evidence of whether the RLC "had its intended outcome or whether the unintended outcome was a reduced availability of credit for good borrowers".

He added: "My view leading into the introduction of the Code was that most lenders were already responsible and taking an approach consistent with the framework." 

Riona Rameka of HomeLend said the RLC had "created a work force of employees who do not know how to work outside the system decision". She added: "It's a 'computer says no', environment because they have created so many layers."

Rameka said it "would be great to go back to a time where we can assess each person's individual situation and tailor their loan application to their situation"

"Banks have been so scared to think outside the box that the non-bank lender market has grown so much over the last 4 years," she added.

Rameka is sceptical whether NZ will follow Australia on responsible lending.

"It would require more credit assessment that the banks are currently struggling to do in today's environment," she added.


Tags: Lending

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Comments from our readers

On 29 September 2020 at 11:26 am Chatterbox said:
If regulators actually knew the extent of "variation" disclosure and systemic "version change" abuses that are being relied on in assessments, loan arrangements, or internal guidance amendments, they would think the code is just a red herring. We should be asking why NZ does not have a commission of inquiry into bank and insurance company conduct and practices rather than when will a code apply or not apply. We should be asking why regulators are failing on so many levels that in Australia the regulator is under investigation by the FBI for not identifying wide scale money laundering that never went reported. Hello ! Self-regulation means self-reporting and self-reporting is a joke in NZ.
On 2 October 2020 at 11:21 am Jason B said:
yes its interesting to see a large bank not picking up unusual banking transactions in Australian , there own internal detection systems have obviously failed.

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