Non-bank lenders add their voice to over CCCFA woes

Non bank lenders have added their voice to a chorus of complaints about the Credit Contracts and Consumer Finance Act (CCCFA).

Thursday, January 20th 2022, 10:32AM 4 Comments

by Eric Frykberg

It follows repeated claims that the Act punishes the innocent along with the guilty, saying it started as an attack on predatory lending but ended up regulating almost everyone.

The Minister of Commerce and Consumer Affairs, David Clark, responded by asking a multi agency organisation, the Council of Financial Regulators, to look into the law.

Fears have already been expressed that this inquiry will be lukewarm, and the Financial Services Federation (FSF) says that must not happen.

The FSF represents 85 financial organisations including big firms like Avanti, Basecorp Finance, Goldband Finance, Pepper Money and Prospa.

It's written an open letter to several politicians and administrators including Clark.

Executive director, Lyn McMorran, says even predatory lending was able to be controlled by the enforcement of existing legislation against such practices.

But in adding new legislation, the Government has targeted almost everyone.

“These regulations have the effect of treating every New Zealand consumer as a “vulnerable borrower” when the significant majority of consumers would consider themselves to be no such thing,” the letter said.

In calling for a review, Clark expressed concern that banks might not be implementing the law in the way it was intended.

McMorran argued this was not possible, because the regulations left no room for interpretation, and lenders dared not risk deviating from a highly prescriptive set of rules.

“The FSF does not believe that the problem lies with the way in which lenders are interpreting these regulations – the regulations are so prescriptive as to leave absolutely no room whatsoever for interpretation,” she wrote.

“They must be complied with as written – no matter how poorly – and that is what lenders are doing and the liability of not doing so is so punitive as to leave lenders with no choice with respect to any kind of interpretation or judgement.”

McMorran added the percentage of loans in arrears had actually declined, which suggested the previous legislation was working well.

The extra credit hurdles could also make it harder for people to upgrade their vehicles, meaning they will stick for longer with older cars, which are less safe and emit more CO2.

Right from the start, the FSF had said a prescriptive approach was always going to be manual and time-consuming from the lenders’ point of view and intrusive and time-wasting from that of the consumer.

To resolve these issues, the FSF is calling for an immediate and comprehensive review of what is working with respect to the regime and what is not.

'This time around, the review needs to take into consideration the views and financial expertise of responsible lenders and more consumers wishing to access credit responsibly.”

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Comments from our readers

On 20 January 2022 at 2:30 pm Murray Weatherston said:
The most pragmatic solution would be for the Government to revoke the most recent law change to CCCFA, and go back to what was the previous situation.
Then get those who understand the situation to identify the bits that aren't working.
However I have more chance of winning the Gold Medal in the Open Ski Jump at the Winter Olympics this year than there is of the Government and officials admitting they might have really cocked-up this time.
And I hope they don't plead "unintended consequences". If people tell them that "if you do A, B will result", but they choose to not listen or ignore that advice and they do A, and B results - that is incompetence, not an unintended consequence.
On 20 January 2022 at 2:42 pm Tang Shing-bor said:
Let's face it. Children are running this country.
On 20 January 2022 at 6:43 pm Amused said:
Essentially every customer is been treated now as “a vulnerable borrower" because of how the law has been written. Banks have no wriggle room within the law to be flexible. How absurd that a law change like this could be introduced and that the people responsible would think that it would actually benefit New Zealanders. This has MBIE's stench all over it.

My sense is that this will all snowball now as more and more people get knocked back by their bank every day. This will then become a major issue for the Government that they will HAVE to address.

On 21 January 2022 at 9:07 am valkyrie6 said:
Yes it will be interesting when Mr Clark applies for a mortgage to purchase his 10th investment property and finds he is knocked back due to too many daily coffee purchases .

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