Law aims to protect borrowers
ACT New Zealand (ACT) is calling for the Finance and Expenditure Committee (Finance Committee) to review the impact of recent amendments to the Credit Contract and Consumer Finance Act (CCCFA) on the banking and mortgage broking industries.
The changes to the CCCFA require all mortgage advisers and lenders to enhance their document and data collection management practices. They aim to protect vulnerable borrowers from shop trucks and predatory lenders, but the industry is unsatisfied with the amendments.
In a letter to the Finance Committee, ACT leader David Seymour emphasised that professionals in the banking and mortgage industries and people trying to get credit have been frustrated with “needless red tape” since the law changes came into effect on December 01.
In a reported case, a man who applied to increase his credit limit by $500 was hit by 15 pages of forms, despite never having missed a payment in the seven years he had the card. The case also suggested the possibility of an artificial credit crunch as the law slows down lending across the board.
“The Finance and Expenditure Committee examined the Credit Contracts Legislation Amendment Bill in 2019. Now, that law is creating widespread headaches for people trying to get credit from their banks, and the committee should be asking why,” Seymour said in a statement.
“I have written to the committee and its chair Dr Duncan Webb, asking that the committee use its powers to initiate a review or at very least seek a briefing into the havoc this law is causing. What is the point of the committee having such power if it won’t use its powers to hear the public’s concerns about the laws it’s been involved in making?”
Read more: Squirrel launches petition calling for Consumer Finance Law rethink
The mortgage and banking industries have been calling on the Minister of Commerce and Commercial Affairs to rethink the changes to the CCCFA.
Last month, mortgage provider Squirrel launched a petition that claims the amendments “make it too difficult to buy or finance a home.”
In the petition, Squirrel managing director John Bolton explained that the changes had significantly increased the time and effort to process a mortgage application from five working days to more than 15 working days.
In addition, he said the changes have “increased the amount of paperwork and inefficiency, and this will result in fees passed on to consumers. New home borrowers can expect to pay establishment fees going forward of $500 [to] $1,000.”