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CCCFA reform inches forward; cabinet paper admits to flaws

Mortgage advisers look like having to comply with the current state of the Credit Contracts and Consumer Finance Act (CCCFA) until June.

Wednesday, March 16th 2022, 8:54AM 5 Comments

by Eric Frykberg

Until then, they will have to stick with rules that all sides agree have harmed responsible, as well as vulnerable would-be borrowers.

The government last week announced partial reforms of the rules while persisting with a fuller investigation through until April.

The first tranche of this two-tranche process includes removing regular savings and investments from the list of a would-be borrower's costs, and ending the need to comb through bank statements where robust financial data is already available.

For some time after this decision was announced, lending industry leaders only knew what they had heard from the media, and they complained of Government by press statement.

But a subsequent email from the Ministry of Business Innovation and Employment (MBIE) has given more information.

The email said MBIE officials were “progressing the work necessary to give effect to the initial changes already agreed.”

There would be a “further update when the initial changes are released for public consultation.

“As outlined in the Cabinet paper, a draft of the regulations and Code changes will be publicly released for comment, with a view to these initial changes being in force by June 2022.”

The time frame for any subsequent changes from the second tranche of the process remains unclear.

Meanwhile, a Cabinet paper released by MBIE contained admissions that the law had produced unintended consequences and could even make some things worse for some borrowers.

It said access to credit had been impacted in a “less targeted way and to a greater extent than intended”.

The paper said processing times were longer and the cost of compliance was sometimes higher.

In addition, consumers facing close scrutiny from lenders expressed worry about their personal privacy.

In some cases they would even be prevented from refinancing an existing loan at a cheaper rate. In extreme cases, they could even be driven into the arms of black-market lenders whom the law was designed to protect against.

The cabinet paper also quoted figures from the Reserve Bank (RBNZ) about the financial cost of all this.

They showed a drop in new mortgage commitments from $9.1 billion in November to $7.9 billion in December.

There was, though, some debate about the seasonal impact on these raw figures. So the RBNZ produced a so-called ‘steady state’ figure. This still showed a drop, but a smaller one, from $9.1 billion to $8.3 - $8.6 billion.

Tags: MBIE

« Prospa says more funds are needed by SMEs after two tough yearsStrong economic rebound in December quarter – Stats NZ »

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Comments from our readers

On 16 March 2022 at 1:23 pm Murray Weatherston said:
I spent a couple of hours this morning first finding and then reading the 40 page Cabinet paper recommending the interim amendments to CCCFA.

I know its only early in the amendment process, but initial reaction that the changes pre-announced were much ado about little was borne out.

Treasury seems to agree as in par 104 Regulatory Impact Statement, Treasury said the proposal to make changes was exempt the normal RIS procedures "on the grounds it has no or only minor impacts on business individuals and [NPF] entities".

But I found 2 new (at least to me) bits of interesting info - to me anyway.

1. RBNZ did not agree with the proposal as they felt Government should wait until the full review had been completed, and
2. The proposed new rules won't take effect till some time in June.

I wonder if lenders have been tipped a "nod and a wink" that the as written rules won't be administered in the meantime and the lenders should proceed as though the yet-to-be-specified exact changes have been entered into the law of the land?
On 16 March 2022 at 1:57 pm Amused said:
Clearly we are drowning in bureaucracy as a country. It's acknowledged officially that changes made to the CCCFA have gone too far negatively impacting borrowers but it now takes us months to fix the mistakes?

Meanwhile the cold message given to people been declined finance at a bank every day is to just be patient.

If this was the private sector the officials at MBIE responsible would have been shown the door. Instead we now let these same people run the enquiry into fixing the mess they caused with no real sense of urgency. What a farce.

On 16 March 2022 at 3:06 pm w k said:
"Instead we now let these same people run the enquiry into fixing the mess"

quote (einstein): "Insanity: doing the same thing over and over again and expecting different results."
On 17 March 2022 at 3:48 pm Tang Shing-bor said:
I'm personally moving into the near bank space. Too many rules, too many restrictions, too much rental income shaving.

The list goes on.

Total government over reach and interference by the RB for my liking.

Not saying it doesn't flow into the second and third tier but for the love of god. I need less shackles in my investment life.
On 17 March 2022 at 4:35 pm Jonny Good Guy said:
And you wonder why we have lots suicides, mental illness, and depression

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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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