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Fatigued finance sector wondering about another CCCFA review

Another review of the controversial  Credit Contracts and Consumer Finance Act (CCCFA) is to be carried out.

Wednesday, August 9th 2023, 11:04AM 3 Comments

by Sally Lindsay

Commerce and Consumer Affairs Minister Dr Duncan Webb says it’s important to keep the Act up to date to ensure it continues to strike the right balance between protecting vulnerable consumers and having a healthy and effective market for credit.

Webb says the rules might need tweaking because of the different products in the market and what sort of interventions they need.

Financial Services Federation (FSF) chief executive Lyn McMorran says Webb claiming that the review is not an admission the Government got the CCCFA wrong in the first place has left her speechless. “Why do we need three reviews of the Act if the Government got it right in the first place? It’s amazing. I am a bit lost for words, really.”

Financial Advice NZ (FANZ) chief executive Katrina Shanks says if a review goes ahead her organisation will expect better consultation and that the advice given will be listened to.

“We do not want a repeat of the 2021 changes to the legislation or the regulations. The sector is fairly fatigued from having just gone through two other reviews.”

McMorran says if Webb is still the Minister after the election the FSF will participate in the review and tell him exactly what it thinks, which it has already done repeatedly. “But, if he's not, well, it's just hot air. It doesn't make any difference at all.”

The CCCFA rules released in December 2021 were widely criticised as stymying credit. Banks delved into people’s spending habits and denied some loans if borrowers had bought takeaways, coffees, Christmas presents and had savings.

Tweaks were made last July and in May this year to address the unintended impacts of the CCCFA. These mean banks don’t need to scrutinise people’s discretionary spending as much as in the past and they are deemed to be intelligent enough to pull back their spending to meet loan repayments.

At the time the CCCFA changes were made the FSF, FANZ, banks, the Bankers’ Association and others told the Government the rules would be too restrictive, that the majority of consumers were not in vulnerable circumstances and just wanted access to credit without having to answer intrusive questions.

McMorran says the CCCFA has made it an unpleasant process for most consumers to get credit and it probably hasn't actually done an enormous amount to help vulnerable consumers because if a responsible lender finds an application doesn't tick all its boxes, the answer will be no as there's no room for judgment.

If someone is turned down by responsible lenders, the need for credit hasn't gone away and they will end up with lenders of last resort – those for whom compliance is not all that important.

Unfortunately, until they are stopped and put out of business, people will be able to get access to credit that they may not be able to afford because of horrendous interest rates.

Shanks says one of the biggest changes the Government can make to the CCCFA is to relax the obligations of directors and managers who must ensure they understand their obligations, have systems and procedures in place, ensure staff follow them and promptly remedy deficiencies. If they don’t they face personal liability, including a penalty of up to $200,000. They cannot be insured against this.

“Basically managers and directors cannot have insurance to protect themselves from vulnerable clients and poor outcomes for consumers and this is where the tightening of credit began.

“Financial Advice NZ understands the intent of the CCCFA is about protecting vulnerable clients, but I think the Government has to understand that when changes are made to the framework legislation, it has an impact on all consumers, not just vulnerable consumers.”

Shanks says these issues were raised at the Select Committee stage and both times the sector’s submissions were not taken into account.

Before making any recommendations for changes to the CCCFA this time, she says the Government needs genuine consultation with the sector to better understand the working environment of lending and obtaining credit in New Zealand.

“If a review eventuates, the Government needs to be careful how it proceeds because we do not want another 2021 situation where the average New Zealander could not obtain credit.”

McMorran doesn’t hold out a great deal of hope for another review from Webb. “A few tweaks have been made but they haven’t made any significant difference at all to the process and now he wants to review the CCCFA again. To me it just screams of the whole thing being badly done in the first place.”

Webb says the review’s terms of reference will be “announced in due course”.

In other changes the Government will extend an exemption for voluntary targeted rate scheme loans (low-cost loans usually for sustainable home improvements like insulation) administered by local and regional councils.

“This will carve them out from the CCCFA and avoid unnecessary compliance costs. I expect regulations to give effect to this exemption to be made by the end of the year,” Webb says. 

A permanent exemption from certain CCCFA obligations for people affected by emergency events will also be developed. The Minister says, based on an assessment of the temporary exemptions in place after the Auckland floods and Cyclone Gabrielle, he sees a case for something more permanent, especially as these events are becoming more frequent.

Webb says the changes are intended to protect Kiwis who need access to credit, while also ensuring an effective, competitive and responsive market for credit.


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Comments from our readers

On 9 August 2023 at 12:38 pm Amused said:
66 days until the general election and the Government once again are trying to fix a broken piece of legislation under the cover of another “review”. It’s telling that the Government will be introducing an extended exemption for voluntary targeted rate scheme loans administered by local and regional councils and introducing a permanent exemption from certain CCCFA obligations for people affected by emergency events. Saying the latter especially is needed now because of increasing weather events doesn’t hide the fact that the original legislation introduced was poorly drafted by MBIE officials who clearly didn't bother to consult with the industry sufficiently. As long as one of the key architects of the CCCFA changes (MBIE) remain involved this review will be a waste of time.

On 10 August 2023 at 3:08 pm Andy the adviser said:
To Amused - once again, you have hit the nail on the head.

I would like to add though, that any review should also include a mandate for consistency across the banks in the questions they ask.

There is ONE piece of legislation, but every bank asks significantly different questions. To claim this is to negate any "collusion" is just ludicrous.

If the banks won't do it, why won't they allow the adviser network to come up with a standard form acceptable to all banks that meets the CCCFA criteria?

This will provide far better outcomes for clients, and speed up the application process.
On 10 August 2023 at 3:21 pm JeffQV said:
Crippling Consumer Confidence Finance Act has no place in residential mortgages as already covered by Responsible Lending Code and other guidelines. National need to commit (Luxom said it would be removed at the FANZ conference last year) to remove it on top of reinstatement of tax deductibility and Brightline back to two years. At the very least repeal the personal liability of lender Directors and Officers.

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AIA - Back My Build 6.19 - - -
AIA - Go Home Loans 8.74 7.14 6.75 6.39
ANZ 8.64 7.74 7.39 7.25
ANZ Blueprint to Build 7.39 - - -
ANZ Good Energy - - - 1.00
ANZ Special - 7.14 6.79 6.65
ASB Bank 8.64 7.14 6.75 6.39
ASB Better Homes Top Up - - - 1.00
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BNZ - Classic - 7.14 6.79 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 7.74 7.39 7.25
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CFML Loans 9.45 - - -
China Construction Bank - 7.09 6.75 6.49
China Construction Bank Special - - - -
Co-operative Bank - First Home Special - 6.79 - -
Co-operative Bank - Owner Occ 8.40 6.99 6.79 6.65
Lender Flt 1yr 2yr 3yr
Co-operative Bank - Standard 8.40 7.49 7.29 7.15
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 6.89 6.55 6.35
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 6.69 6.59
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Kainga Ora 8.64 7.74 7.35 6.99
Kainga Ora - First Home Buyer Special - - - -
Kiwibank 8.50 7.99 7.79 7.55
Kiwibank - Offset 8.50 - - -
Kiwibank Special - 6.99 6.79 6.65
Liberty 8.59 8.69 8.79 8.94
Nelson Building Society 9.00 7.65 7.25 -
Pepper Money Advantage 10.49 - - -
Pepper Money Easy 8.69 - - -
Pepper Money Essential 8.29 - - -
Resimac - LVR < 80% 8.84 8.09 7.59 7.29
Lender Flt 1yr 2yr 3yr
Resimac - LVR < 90% 9.84 9.09 8.59 8.29
Resimac - Specialist Clear (Alt Doc) - - 8.99 -
Resimac - Specialist Clear (Full Doc) - - 9.49 -
SBS Bank 8.74 7.74 ▼7.09 ▲6.95
SBS Bank Special - 7.14 ▼6.49 ▲6.35
SBS Construction lending for FHB - - - -
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SBS Unwind reverse equity 9.95 - - -
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TSB Bank 9.44 7.79 7.55 7.45
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TSB Special 8.64 6.99 6.75 6.65
Unity 8.64 6.99 6.79 -
Unity First Home Buyer special - 6.55 6.45 -
Wairarapa Building Society 8.60 6.95 6.85 -
Westpac 8.64 7.84 7.35 6.99
Westpac Choices Everyday 8.74 - - -
Westpac Offset 8.64 - - -
Westpac Special - 7.24 6.75 6.39
Median 8.64 7.19 7.17 6.65

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