Legislation should target high-cost lenders, MP says
National Party MP Andrew Bayly has undertaken to change the Credit Contracts and Consumer Finance Act if the party wins the election in October.
Changes to the CCCFA were introduced on December 1, 2021, aimed at protecting consumers from unaffordable debt. The changes placed increased onus on lenders to ensure loans were suitable and affordable, prompting concerns that the CCCFA was overly prescriptive.
The Act has undergone three rounds of amendments, starting with the removal of unnecessary enquiries into living expenses on bank statements (effective July 7, 2022).
Further amendments were made in August, followed by the exclusion of discretionary expenses from affordability testing, effective May 4, 2023.
Bayly (pictured above), National MP for Port Waikato and spokesperson for small business, revenue, commerce, consumer affairs and manufacturing, said that the CCCFA was not working as it should.
He told NZ Adviser that in his view, the CCCFA regulations should be tailored towards high-cost lenders (such as payday lenders), rather than banks and tier 2 products, such as credit unions.
The CCCFA should be aimed at ensuring vulnerable New Zealanders are given fair access to funds for emergency purposes (such as for car repairs), whilst offering them adequate protections, he said.
Bayly said that as a result of the regulations, vulnerable [borrowers] found it harder to access traditional borrowing sources, prompting some to turn to unscrupulous means to get the money.
“As a very short term, we would take the CCCFA back to where it was and then shortly after, retailor them so we are focused on the worst parts of the lending sector that do need proper checks and balances,” Bayly said.
He said that all parties had agreed to contend with the issue of high-cost lending to vulnerable Kiwis, and that National agreed to push Bill changes through.
After the Bill was passed, officials worked on the regulations, which he said included prescriptive lending practices. Coinciding with the changes, lenders became nervous about their liability, prompting an overcautious approach.
According to Bayly, bank CEOs told him earlier this year that lending was down by around 10% that would’ve otherwise occurred if it hadn’t been for the CCCFA (Reserve Bank figures show total residential mortgage lending was $2.7bn in January, down from $4.68bn in January 2022).
He told NZ Adviser that he’d spoken to a second-tier lender who said that what normally took them around two hours to process a loan, now took just over a day. For the lender concerned, the cost of delivering that loan meant that they couldn’t process loans under a value of $10,000, he said.
Bayly said there were concerns that people who needed funds were unable to access it, which was not only a financial but also a social issue.
He said that National’s view was to look at what could be done today to tailor the legislation where it needed to be tailored. It’s focus would be on bringing back to the intention of the Bill, which was not to focus on banks and reputable lenders, but to ensure lenders dealing in high cost financing were lending appropriately to vulnerable new Zealanders.
Minister for Commerce and Consumer Affairs provides update
In response to whether further changes to the CCCFA would be made, Minister for Commerce and Consumer Affairs Duncan Webb said in a statement that he was continuing to work to ensure consumer credit settings “strike the right balance”.
“I want to ensure that vulnerable borrowers are protected while ensuring an effective, competitive and innovative market for credit,” he said.
“We want to understand how effective the recent adjustment to the consumer credit regulations have been and the views of a range of interested parties have been obtained and am actively looking into this."