Financial Services Federation unimpressed with National Party proposal to favour banks over its finance company, building society & credit union members

The Financial Services Federation (FSF), the lobby group for non-bank financial institutions, is not impressed with the National Party's idea of excluding banks from the Credit Contracts and Consumer Finance Act (CCCFA), but having it continue applying to the FSF's building society, credit union and finance company members.

National Leader Christopher Luxon, and Deputy Leader and Finance Spokeswoman Nicola Willis, have both spoken of a desire to exclude banks from the CCCFA this month. Luxon at a Finance Advice NZ conference in Christchurch, and Willis in an interview. 

FSF Executive Director Lyn McMorran told interest.co.nz that whilst the CCCFA is "a complete and utter mess," National's idea isn't a good one.

"We're not at all comfortable with the idea of there being one rule for one set of lenders and one for another. I think a prospective government shouldn't be proposing something that creates a competitive advantage to one group against another," McMorran said.

"Our members represent 1.7 million New Zealanders ... so it almost suggests that those 1.7 million New Zealanders are not nearly as important as bank customers. So we're not happy with the idea at all."

McMorran said the FSF does agree that the CCCFA, which she describes as "a complete and utter mess," needs fixing as it's too prescriptive. But the answer is not to exclude one group.

"We don't even like the idea of a temporary exclusion for banks between now and the next election," McMorran said.

She added that National won't have the numbers in Parliament to make the change before next year's election, and wasn't sure what the party's priorities might be should it lead a government after the election.

Speaking in Christchurch Luxon said: "The CCCFA is getting in the way - worsening access to credit without making our financial system healthier. That’s why we’re committed to re-writing the legislation to make sure high-risk predatory lending is targeted, without dragging major commercial lenders into the net of unnecessary rules and regulations."

Meanwhile Willis told Good Returns: "Banks are by their nature and experience experts in this. They've done it for decades, if not hundreds of years. And it's not in their interests to lend to people who can't repay. So what we've proposed is that there should be a differential in the regulatory regime, where those commercial banks who are governed by the Reserve Bank's prudential frameworks should have a far less prescriptive regulatory regime when it comes to consumer credit and finance than your second tier lenders."

The Reserve Bank regulation of banks, non-bank deposit takers and insurers doesn't include oversight of any consumer protection laws. Rather, the Reserve Bank is the prudential regulator overseeing a legal framework focused on the financial safety and stability of institutions and the broader financial system.

Highlighting changes to the CCCFA that took effect from December 1 last year, Commerce and Consumer Affairs Minister David Clark said unfair lenders had been cashing in on Kiwi consumers for too long, and New Zealanders could expect better protection from high-cost loans and unaffordable debt. However critics were far from impressed, saying there was no problem to be solved and the new rules were too prescriptive. 

Following a drop-off in the uptake of consumer debt and home loans, the Government has subsequently tweaked the regulations twice. Firstly in March, and then again in August. The Ministry of Business, Innovation and Employment opened consultation on the proposed August changes to the CCCFA regulations and the Responsible Lending Code on Thursday.

FSF members include Avanti Finance, the SBS Bank-owned Finance Now, First Credit Union, Geneva Finance, Instant Finance, Latitude Financial, Nelson Building Society, Resimac, Toyota Finance and UDC Finance.

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