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CCCFA changes: What advisers need to know

Changes to the Credit Contracts and Consumer Finance Act are set to impact borrowers from October 1. Here's what the amended lending rules will mean for clients.

Friday, August 27th 2021, 8:55AM 3 Comments

The CCCFA is set to undergo a series of changes governing consumer lenders and the directors of those companies.

New rules on borrower suitability and affordability will hit brokers and their clients directly, and are expected to make lenders adopt stricter affordability criteria. 

From October, lenders will be under a more prescriptive regulatory regime, and will be required to place more scrutiny than ever on borrower affordability. 

The regulations will set out an express list of enquiries to establish that a loan is suitable for a borrower.

They will also outline requirements for lenders to estimate borrowers' income and expenses, and verify expenses, to ensure borrowers can afford repayments.

The rules will force borrowers to provide more granular details and evidence around their spending as they apply for loans.

According to Kate Lane, a partner at MinterEllisonRuddWatts, the CCCFA changes will "set a base line as to what analysis lenders must do in relation to suitability and affordability".

She adds: "As the regulations basically take a one-size-fits-all approach, potential borrowers who are non-standard might find that they fall in the too-hard basket for some lenders given the detailed verification work required on income and expense information."

Lane says the regulation will prescribe that expense information is verified against reliable evidence, a process likely to be "very time consuming". 

Lenders have already begun to adjust their processes, and the effect of the incoming CCCFA changes have been felt in the mortgage market.

According to independent economist Tony Alexander's latest market report, banks have begun to pay more attention to the short-term debt of borrowers, particularly first home buyers.

Alexander said lenders were monitoring debt and purchases on pay-later services such as Afterpay.

"There is a general tightening of criteria as banks get ready for the new Credit Contracts and Consumer Finance Act (CCCFA) changes," he said. "This legislation requires lenders to be certain the borrower fully understands what they are signing up to."

For further details on the legislation and the new rules on borrower expenses, click here.

Tags: affordability CCCFA legislation Lending regulation suitability

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Comments from our readers

On 27 August 2021 at 10:50 am Andy the adviser said:
From my experience, banks are not the problem. The real problems are caused by the likes of Afterpay, consumer finance/hire purchase, and loan sharks. Pushing more unnecessary requirements onto the banks more will only force consumers into more unethical lending solutions.

I spend far more time 'rescuing' people from the likes of GEM finance, Farmers and Afterpay than I ever have saving them from banks.

As an adviser, it feels more and more like we will be treating our clients like criminals, trying to justify the legislation on behalf of the banks.
On 27 August 2021 at 11:00 am Andy the adviser said:
"As the regulations basically take a one-size-fits-all approach, potential borrowers who are non-standard might find that they fall in the too-hard basket..."

So they will head to an easier and more expensive source of finance (2nd or 3rd tier).

Maybe this is playing right into the hands of the banks - only take the purely vanilla deals, and leave anything else to the rats and mice. I certainly hope they drops their rates accordingly, because they are further reducing their risk exposure.

No - I think the real issues at play are the finance companies, after-pay providers and loan sharks. THEY are the ones who need to be held a lot more accountable.

OR - take away hire purchase and make more incentives for saving,
On 30 August 2021 at 10:49 am two cents said:
Borrowers will need good mortgage advisers to present (and argue) their case even more. Pretty soon we will all need law degrees.

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AIA 4.55 2.85 3.25 3.55
ANZ 4.44 3.20 3.59 4.00
ANZ Blueprint to Build 1.68 - - -
ANZ Special - 2.60 2.99 3.40
ASB Back My Build 1.79 - - -
ASB Bank 4.45 2.85 3.25 3.55
Basecorp Finance 5.49 - - -
Bluestone 3.49 3.34 2.99 3.34
BNZ - Classic - ▲2.85 ▲3.25 ▲3.55
BNZ - Mortgage One 5.15 - - -
BNZ - Rapid Repay 4.60 - - -
Lender Flt 1yr 2yr 3yr
BNZ - Std, FlyBuys 4.55 ▲3.45 ▲3.85 ▲4.15
BNZ - TotalMoney 4.55 - - -
CFML Loans 4.95 - - -
China Construction Bank 4.49 4.70 4.80 4.95
China Construction Bank Special - 2.65 2.65 2.80
Credit Union Auckland 5.95 - - -
Credit Union Baywide 5.65 3.95 3.85 -
Credit Union South 5.65 3.95 3.85 -
First Credit Union Special 5.85 2.95 3.45 -
Heartland Bank - Online 2.25 1.85 2.35 2.65
Heretaunga Building Society 4.99 3.80 3.90 -
Lender Flt 1yr 2yr 3yr
HSBC Premier 4.49 2.19 2.45 2.69
HSBC Premier LVR > 80% - - - -
HSBC Special - 2.25 - -
ICBC 3.69 2.35 2.75 3.05
Kainga Ora 4.43 2.88 3.28 3.59
Kainga Ora - First Home Buyer Special - 2.25 - -
Kiwibank 3.75 ▲3.80 ▲4.00 4.34
Kiwibank - Offset 3.75 - - -
Kiwibank Special 3.75 ▲2.95 ▲3.15 3.49
Liberty 5.69 - - -
Nelson Building Society 4.95 2.99 3.24 -
Lender Flt 1yr 2yr 3yr
Pepper Essential 4.79 - - -
Resimac 3.39 2.98 2.79 3.29
SBS Bank 4.54 2.99 3.39 3.59
SBS Bank Special - 2.49 2.89 3.09
Select Home Loans 3.49 3.34 2.99 3.34
The Co-operative Bank - First Home Special - ▲2.65 - -
The Co-operative Bank - Owner Occ 4.40 ▲2.85 ▲3.25 ▲3.49
The Co-operative Bank - Standard 4.40 ▲3.35 ▲3.75 ▲3.99
TSB Bank 5.34 3.35 3.75 4.05
TSB Special 4.54 2.55 2.95 3.25
Wairarapa Building Society 4.99 3.55 3.49 -
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Westpac 4.59 ▲3.45 ▲3.85 4.09
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Median 4.54 2.95 3.25 3.49

Last updated: 23 September 2021 8:11am

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