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Banks need to make CCCFA easy for advisers: Gough

Banks, finance companies and mortgage advisers are gritting their teeth and bracing for mountains of paperwork as the (not so) brave new world of credit legislation starts next week.

Tuesday, November 23rd 2021, 6:00AM 3 Comments

by Eric Frykberg

Hardly anyone has anything good to say about the Credit Contracts and Consumer Finance Act (CCCFA) as it forced its way through parliament, and they were even less complimentary about what they saw as its rushed timing.

But like it or not, the law comes into effect on December 1 and everyone has to comply. 

The bravest of brave faces has come from the Bankers Association, which declared that “banks are responsible lenders, and support the aims of the law”.

Earlier, the association complained the CCCFA was being rushed through without sufficient clarity on what had to be done and without enough time to do it.

For now, the bankers are limiting themselves to saying customers will have to supply more information when applying for a loan, lenders will have to check it out much more carefully, and the whole process will take longer.

The Financial Services Federation is more blunt.

Executive director Lyn McMorran says the new regime is highly prescriptive, members could easily get the details wrong, and a checklist has had to be provided so lenders can avoid inadvertent error.

She adds some borrowers will be shocked to go to a lender they have been dealing with for years and have to answer potentially intrusive questions about their spending habits.

Analysing their answers would take time and cost money and be rigid and formalised.

McMorran said lenders were losing their ability to make judgements about the reliability of borrowers to service a loan.

“If it doesn't tick all the boxes then they might find it hard to get a loan.

“We are concerned about that because we see bad times ahead and access to credit is essential to keep an economy moving.”

Mortgage brokers are even more outspoken in their opposition. Mortgage Lab says the amount of work for its staff has doubled or tripled due to the new law.

Its chief executive Rupert Gough adds the aim of the legislation makes sense but it imposes extra work for no pay onto mortgage advisers.

“If you are moving from a fixed term (loan) to revolving credit, that involves a full application, and no pay for it.

“So why would an adviser do 10 hours of extra work for free?

“Yet it is a really important part of the process for the client, so banks are going to have to rethink how they remunerate mortgage advisers and how they pass the costs on to the consumer at the end of the day.”

Gough adds the law was brought in to protect vulnerable people but ended up far too wide.

“The 1% of the market that are targeting vulnerable people (with predatory lending) have caused the other 99% to have to do all this extra work.”

John Bolton heads the Auckland broking firm Squirrel and says the law was poorly thought out, and has many unintended consequences.

“Business owners are going to struggle to release capital from their owner-occupied properties, which is crazy because that is how most small businesses support themselves. 

“The Government has just shown it clearly has no understanding about how the residential mortgage market works and how much it supports the wider New Zealand economy.”

But like it or lump it, the CCCFA is coming, and the industry is being forced to hunker down and cope.

Gough, for his part, has one idea for making the new regime less onerous: not having different systems from different banks, so that brokers don't have to duplicate their efforts.

“What would be nice is if the banks could agree on a uniform measurement of what the policy looks like.

“They will be worried about the dangers of collusion if they do that, but at the end of the day, they have to come together and say this is what a good mortgage application looks like, and we all agree on that.”


« Will it be a 25 or 50 basis point rate increase this week?BNZ has further toughened its lending criteria »

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Comments from our readers

On 23 November 2021 at 9:44 am michaelb said:
If I was going from fixed to variable why would I go to a broker. I doubt very much a bank or banks’ are going to remunerate brokers or financial whatever. I think the days of brokers are coming to and end. Get a job at a bank. It pays better.
On 23 November 2021 at 10:15 am nzeverydayinvestor said:
Great statement from John Bolton here: “The Government has just shown it clearly has no understanding about how the residential mortgage market works and how much it supports the wider New Zealand economy.”

When the cost of money (interest rates) increase, and you have less access to it (availability) - you have the makings of a perfect storm. Even those who quietly support modern monetary theory through their actions, are likely wondering what happens when the source of new credit creation comes to a grinding halt.
On 24 November 2021 at 11:31 am Murray Weatherston said:
Does anyone know whether Government did a cost benefit analysis on these changes?
It is clear that there is going to be increased cost for banks brokers and customers in collating and assessing all this new information - that cost will all eventually sheet home to the expense of the customer.
Have the benefits to the customer been quantified, and do they exceed the costs.
You don't need to be an Einstein to know that fewer customers will get loans under these new rules than would have been the case hithertobefore.
And when we add in Debt to Income ratios, minimum 20% LVRs and affordability assessments at 7% interest (so including Principal repayments of some 2-3% p.a, then a lot more willing borrowers are going to miss out.
As money is like rust, I wonder what the outside of bank workaround will be.
A long time again tight regulation of the banks led to the growth of the solicitor nominee companies. Mortgage lending managed funds anyone?

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Lender Flt 1yr 2yr 3yr
AIA - Back My Build 6.19 - - -
AIA - Go Home Loans 8.74 7.45 7.05 6.85
ANZ 8.64 ▼7.84 ▼7.39 ▼7.25
ANZ Blueprint to Build 7.39 - - -
ANZ Good Energy - - - 1.00
ANZ Special - ▼7.24 ▼6.79 ▼6.65
ASB Bank 8.64 ▼7.29 ▼6.85 6.65
ASB Better Homes Top Up - - - 1.00
Avanti Finance 9.15 - - -
Basecorp Finance 9.60 - - -
Bluestone 9.24 - - -
Lender Flt 1yr 2yr 3yr
BNZ - Classic - 7.29 6.85 6.65
BNZ - Green Home Loan top-ups - - - 1.00
BNZ - Mortgage One 8.69 - - -
BNZ - Rapid Repay 8.69 - - -
BNZ - Std, FlyBuys 8.69 7.89 7.45 7.25
BNZ - TotalMoney 8.69 - - -
CFML Loans 9.45 - - -
China Construction Bank - 7.09 6.75 6.49
China Construction Bank Special - - - -
Co-operative Bank - First Home Special - ▼7.09 - -
Co-operative Bank - Owner Occ 8.40 ▼7.29 6.89 6.75
Lender Flt 1yr 2yr 3yr
Co-operative Bank - Standard 8.40 ▼7.79 7.39 7.25
Credit Union Auckland 7.70 - - -
First Credit Union Special - 7.45 7.35 -
First Credit Union Standard 8.50 7.99 7.85 -
Heartland Bank - Online 7.99 6.69 6.45 6.19
Heartland Bank - Reverse Mortgage - - - -
Heretaunga Building Society 8.90 7.60 7.40 -
HSBC Premier 8.59 - - -
HSBC Premier LVR > 80% - - - -
HSBC Special - - - -
ICBC 7.85 7.05 6.85 6.59
Lender Flt 1yr 2yr 3yr
Kainga Ora 8.64 7.79 7.59 7.29
Kainga Ora - First Home Buyer Special - - - -
Kiwibank 8.50 8.35 7.89 7.65
Kiwibank - Offset 8.50 - - -
Kiwibank Special - 7.35 6.89 6.75
Liberty 8.59 8.69 8.79 8.94
Nelson Building Society 9.00 7.90 7.39 -
Pepper Money Advantage 10.49 - - -
Pepper Money Easy 8.69 - - -
Pepper Money Essential 8.29 - - -
Resimac - LVR < 80% 8.84 8.30 7.89 7.69
Lender Flt 1yr 2yr 3yr
Resimac - LVR < 90% 9.84 9.30 8.89 8.69
Resimac - Specialist Clear (Alt Doc) - - 8.99 -
Resimac - Specialist Clear (Full Doc) - - 9.49 -
SBS Bank 8.74 7.95 7.45 7.29
SBS Bank Special - 7.45 6.95 6.79
SBS Construction lending for FHB - - - -
SBS FirstHome Combo 6.19 7.05 - -
SBS FirstHome Combo - - - -
SBS Unwind reverse equity 9.95 - - -
Select Home Loans 9.24 - - -
TSB Bank 9.44 8.19 7.55 7.55
Lender Flt 1yr 2yr 3yr
TSB Special 8.64 7.39 6.75 6.75
Unity 8.64 6.99 6.85 -
Unity First Home Buyer special - - 6.45 -
Wairarapa Building Society 8.60 7.15 6.85 -
Westpac 8.64 7.89 7.49 7.25
Westpac Choices Everyday 8.74 - - -
Westpac Offset 8.64 - - -
Westpac Special - 7.29 6.89 6.65
Median 8.64 7.45 7.37 6.77

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