Lending rules: more tweaks announced

WELLINGTON: The Government has agreed to further loosen new regulations that have been criticised for making it too difficult for people to get loans.

Commerce and Consumer Affairs Minister Dr David Clark has identified three changes he plans to make to the Credit Contracts and Consumer Finance Act (CCCFA) rules. They include:

Narrowing expenses considered by lenders to more explicitly exclude discretionary expenses.

Reducing ‘‘double counting’’ of expenses associated with revolving credit contracts such as credit cards and buy now, pay later schemes.

Helping make debt refinancing or debt consolidation more accessible if appropriate for borrowers.

The Ministry of Business, Innovation and Employment (MBIE) will consult on the finer details of the changes ahead of them taking effect in March next year.

Dr Clark said he was confident balance had been struck between maintaining a strong level of consumer protection and ensuring people had access to credit.

This is the second tranche of tweaks he is making to regulations under the CCCFA.

He was met with a barrage of complaints from bankers, mortgage brokers and wouldbe borrowers when new regulations and a responsible lending code under the updated Act took effect on December 1 last year.

The criticism was that they were too heavyhanded.

Dr Clark responded by getting the Council of Financial Regulators to relook at the rules. The investigation was led by MBIE, which headed up the initial review of the CCCFA.

Ahead of the council’s report, Dr Clark in March announced the first tranche of changes. Those took effect a month ago.

He said the latest clarifications would assist banks and lenders with some of the more technical aspects of the legislation.

He recognised unintended consequences related to the CCCFA had emerged. Borrowers who should pass affordability tests were being declined, and borrowers were being ‘‘subject to unnecessary or disproportionate inquiries that are perceived by them as being intrusive’’.

However, he discarded a recommendation the council made to amend affordability regulations to better target specific lending, lenders or consumers where there is a higher risk of substantial hardship.

The changes had a mixed response from the banking sector and consumer representatives.

Consumer New Zealand chief executive Jon Duffy said the limited changes looked to be reasonable but it was ‘‘not ideal’’ that there had had to be three rounds to get the legislation right.

New Zealand Bankers Association chief executive Roger Beaumont said it would have been better to target affordability regulations to riskier lending and lenders, as well as make changes to the penalties regime.

Focusing on borrowers most at risk would ‘‘provide them with appropriate protections as well as freeing up lending for those who can afford it’’, he said.

He said the Government had announced some positive changes including narrowing the expenses considered by lenders, relaxing some assumptions lenders were required to make about credit cards and helping make debt consolidation more accessible. —