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A win for borrowers; CCCFA changes won

Cabinet agrees to CCCFA reform.

Friday, March 11th 2022, 8:56AM 4 Comments

by Eric Frykberg

The Government has just announced big changes to the Credit Contracts and Consumer Finance Act (CCCFA).

This follows a storm of criticism of the Act and a review ordered by the Minister of Commerce and Consumer Affairs, David Clark.

The Act, which came into effect last December was intended to protect vulnerable borrowers, but ended up penalising almost everyone.

In making the changes, Clark said there was “little enthusiasm for wholesale changes to the Act, but instead a preference for some practical amendments.”

And he said there was no reason to think the CCCFA was the main driver in reduced lending.

It was also important to note the changes were not the final word.

The changes include removing regular 'savings' and 'investments' as examples of outgoings that lenders need to enquire into when assessing the borrower's future expenses.

They also clarify that when borrowers provide a detailed breakdown of their future living expenses, and these are benchmarked against robust statistical data, there is no need to also enquire into their current living expenses from recent bank transactions.

They also say that where lenders choose to estimate future expenses from recent bank transaction records, they are permitted to obtain information about how their current expenses are likely to change once the contract is entered into.

And they say that the requirement to obtain information in ‘sufficient detail’ only relates to information provided by borrowers directly, rather than relating to information from bank transaction records.

They provide further guidance on when a lender needs to allow for a ‘reasonable surplus’ and how lenders should set surplus requirement.

And the changes provide alternative guidance and examples for when it is ‘obvious’ that a loan is affordable. In cases like that, a full income and expense assessment will not be required.

Tags: CCCFA

« Ownership changes at SuperCity MortgagesMortgage advisers welcome CCCFA reform, but more detail needed »

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Comments from our readers

On 11 March 2022 at 10:19 am valkyrie6 said:
OMG
Are you serious Mr Clark,

“’The changes include removing regular 'savings' and 'investments' as examples of outgoings that lenders need to enquire into when assessing the borrower's future expenses?

They also clarify that when borrowers provide a detailed breakdown of their future living expenses, and these are benchmarked against robust statistical data, there is no need to also enquire into their current living expenses from recent bank transactions.

They also say that where lenders choose to estimate future expenses from recent bank transaction records, they are permitted to obtain information about how their current expenses are likely to change once the contract is entered into.

And they say that the requirement to obtain information in ‘sufficient detail’ only relates to information
provided by borrowers directly, rather than relating to information from bank transaction records.””

Lenders in New Zealand have been applying common sense to lending applications for over 100 years already Mr Clark and they have some of the lowest mortgage defaults in the southern hemisphere.

Now embarrassingly you’re telling the experts the basics of how to run their business, amazing to you have so many talents and expertise in a wide variety of Industries.

I’m still shocked to see yet another overpopulated government department spending taxpayers’ money to overregulate yet another industry causing a reverse negative effect on consumers.

Ask any banker, mortgage adviser, real estate agent, conveyancing lawyer if the CCCFA changes have had a negative effect on mortgage lending and I would say you would get a resounding Yes! all round.

I feel for all the perfectly sound potential mainstream mortgage borrows that have missed out on purchasing the family home over the last 4 months because they purchased Uber eats that one time to many over a three-month period.

MBIE among their many talents and different industry expertise really need to get there research right before making half-baked recommendations and changing Acts that effect lives, if only there was some person accountability for one’s mistakes, now wouldn’t that be something new for the current Government
On 11 March 2022 at 12:17 pm Amused said:
Well said valkyrie6. You have summed things up perfectly. New Zealand needs a new Minister of Commerce who actually knows what he is talking about. Heads also need to roll at MBIE. What value is the ministry adding to the country if the Government has to remove regulations it recommended only last year? This is a very poor look for the law makers as it illustrates the whole process was rushed through without proper consultation taking place within the industry.

For the sake of borrowers around the country lets hope the banks are able to apply these "practical amendments" quickly to their lending policies and we can all get back to common sense lending.
On 11 March 2022 at 2:24 pm resnter said:
100% agree valkyrie6!

Show us the data on mortgagee sales to back the recommendations. Banks and good advisers already are prudent, you have the regular checks in place which are a pretty good bench mark for making a decision on whether to lend to a client or not.

Remember like: Credit checks, account conduct, income and debt levels for servicing and the inflated servicing rate to act as a buffer to ensure clients could afford a margin on current rates if they go up. The savings and investments are a joke they should have never ever been added in the first place, clients save surplus income end of story, they are not that dumb to go into debt just to continue saving!

Get back to basics and try and make a common-sense approach but unfortunately, the banks are too scared so you have to then tell them what common sense is..... judging clients on what they choose to spend money on is over the top, unwarranted and frankly crossing the line. I suppose you have heard Nonbanks are having a great run at the moment I wonder why! yet you are protecting "vulnerable clients" as if! You are making them vulnerable!
On 11 March 2022 at 4:41 pm two cents said:
Do we really think an assessor can unsee bank statements when that evidence is required? I predict long client letters of explanation for every little thing we see that varies from the evidence presented.

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Lender Flt 1yr 2yr 3yr
AIA 5.35 4.49 5.25 5.55
ANZ 5.54 5.15 5.85 6.15
ANZ Blueprint to Build 2.78 - - -
ANZ Special - 4.55 5.25 5.55
ASB Bank 5.35 4.49 5.25 5.55
Avanti Finance 5.45 - - -
Basecorp Finance 6.45 - - -
Bluestone 5.29 7.49 7.59 -
BNZ - Classic - 4.55 5.25 5.45
BNZ - Mortgage One 5.55 - - -
BNZ - Rapid Repay 5.55 - - -
Lender Flt 1yr 2yr 3yr
BNZ - Std, FlyBuys 5.55 5.35 5.94 5.99
BNZ - TotalMoney 5.55 - - -
CFML Loans ▲6.45 - - -
China Construction Bank 5.50 5.40 6.14 6.40
China Construction Bank Special - 4.45 5.19 5.45
Credit Union Auckland 5.95 - - -
First Credit Union Special 5.85 4.70 5.20 -
Heartland Bank - Online 4.00 3.85 4.70 4.84
Heretaunga Building Society 5.95 4.80 5.50 -
HSBC Premier 5.49 4.39 5.15 5.39
HSBC Premier LVR > 80% - - - -
Lender Flt 1yr 2yr 3yr
HSBC Special - - - -
ICBC 5.25 ▲4.29 ▲5.09 ▲5.35
Kainga Ora ▲5.43 ▲4.57 ▲5.58 ▲5.85
Kainga Ora - First Home Buyer Special - 2.25 - -
Kiwibank 5.00 5.55 6.19 6.39
Kiwibank - Offset 5.00 - - -
Kiwibank Special 5.00 4.55 5.19 5.39
Liberty 4.84 - - -
Nelson Building Society 5.95 4.95 5.85 -
Pepper Essential 3.44 - - -
Resimac 4.59 5.60 6.16 6.29
Lender Flt 1yr 2yr 3yr
SBS Bank 5.29 4.69 5.35 5.49
SBS Bank Special - 4.19 4.85 4.99
Select Home Loans 4.09 4.29 4.86 5.09
The Co-operative Bank - First Home Special - ▲4.19 - -
The Co-operative Bank - Owner Occ 5.45 ▲4.29 5.19 5.45
The Co-operative Bank - Standard 5.45 ▲4.79 5.69 5.95
TSB Bank 5.59 ▼5.14 6.05 6.15
TSB Special 4.79 ▼4.34 5.25 5.35
Unity 5.65 ▲4.80 ▲5.50 -
Wairarapa Building Society 5.24 4.55 5.20 -
Westpac 5.54 5.09 5.79 6.09
Lender Flt 1yr 2yr 3yr
Westpac - Offset 5.54 - - -
Westpac Special - 4.49 5.19 5.49
Median 5.45 4.55 5.25 5.52

Last updated: 16 May 2022 9:03am

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