“A lot of people just haven't been able to get out and do the work that needs to be done”
New Zealand’s lending sector is facing a huge raft of compliance and regulation changes over the coming year, but prolonged restrictions in Auckland may be causing issues for lender preparedness, with some of the incoming changes having already been pushed back due to the lockdown.
The new CCCFA regime was scheduled to begin on October 01, but has been delayed by two months to December 01, 2021. However, Financial Services Federation (FSF) executive director Lyn McMorran said that lenders headquartered in Auckland may have a difficult time getting everything in place before the December 01 deadline, and explained that they have been under “an awful lot of stress” in trying to manage the changes, along with an uncertain COVID-19 situation.
McMorran noted that lenders were only given detailed information on the changes in February, and with Auckland set to stay at Level 3 for at least another week, rolling out new systems and training will be a difficult task.
“The CCCFA changes are very significant - they’re really massive for the sector,” McMorran said.
“We didn’t actually know exactly what all those changes were going to look like until February of this year, and we had a commencement date of October 01, which has now been pushed back to December 01 because of lockdown.”
“I think there’s been an awful lot of stress on lenders, and there’s been a lot of pressure to meet that deadline,” she explained.
“The lenders have all been getting out there and implementing all the system changes that are needed, plus all of the changes to documentation, staff training, training of intermediaries and advisers, and so on. A lot of that is driven by head offices which are in Auckland, and so a lot of people just haven’t been able to get out and do the work that needed to be done.
“Getting that two-month extension was very welcome, but a lot still depends on how much longer this lockdown is going to last.”
Along with the CCCFA changes, non-bank lenders are also anticipating the introduction of the Deposit Takers Act. This was announced by Minister of Finance Grant Robertson in April following a review of the Reserve Bank of New Zealand Act, and will create a single regulatory regime for all bank and non-bank deposit takers.
Among other things, the Deposit Takers Act will introduce a deposit insurance scheme which will cover up to $100,000 for each depositor, in case of a lender failure.
Lenders will also be preparing for the implementation of the COFI Bill next year, and will be tightening their lending standards in order to fully comply with the CCCFA. McMorran said that public information and awareness will also need to be considered, as a relatively small proportion of the public will be aware that access to credit will become tighter from December 01.
“One of the things that the CCCFA will do is take away a lot of the judgement that lenders have used in the past,” McMorran said.
“It’s not that they’ve been saying that they don’t need to get information from the borrower, but so far, it has been more or less a case of them taking the borrower at their word. That’s going to change a lot for all lenders, including the banks, when the new CCCFA regime comes into force.”
“One of the things that we’ll be doing closer to the time is issuing a consumer resource that explains the changes, why the lenders are now asking a whole lot more questions, more information about discretionary spending, etc.,” she explained. “We’re looking to launch that just before December 01, when the changes are going to happen, and to explain to the public why access to credit might be getting a bit more difficult.”
“I’ve certainly been hearing that people are under a lot of pressure to be fully compliant, particularly when you put the COFI legislation on top of everything that’s already happening,” McMorran concluded.
“Then we also have the new Deposit Takers Act, which is going to start to go through the process soon and will introduce things like depositors’ insurance. The compliance matters are never-ending, and there’s going to be a lot to work on.”