The Government is moving to both make access to loans easier and bolster financial dispute resolution services, Commerce and Consumer Affairs Minister Andrew Bayly announced on Sunday.
Bayly says 11 pages of "overly prescriptive affordability regulations" for lending introduced by the previous Labour government will be revoked.
At the same time he says the rules of the four approved dispute resolution schemes will be aligned, and the maximum amount the schemes can award will increase to $500,000 so more consumers can settle financial disputes without going to court. Changes are to be in place by July 18.
Bayly says the Government will also support the proposed merger between two dispute resolution schemes, the Insurance & Financial Services Ombudsman Scheme (IFSO) and Financial Services Complaints Ltd (FSCL). The other two schemes are the Banking Ombudsman and the Financial Dispute Resolution Service (FDRS). Currently IFSO can’t award more than $200,000, while the Banking Ombudsman, FSCL and FDRS can’t award more than $350,000.
“When the affordability regulations were introduced into the Credit Contracts and Consumer Finance Act (CCCFA) in December 2021 it threw a bucket of cold ice over banks and financial providers by prescribing minimum steps to assess the affordability of a loan. The overly arduous checks meant the time it took to process loans dramatically increased. Lenders told me that a small loan that used to take two hours to process suddenly took up to eight hours," Bayly says.
"This meant it was no longer affordable for many providers to offer small loans. It became very difficult for everyday Kiwis, who need $500 to fix their broken-down car, to access a safe line of credit. They were effectively frozen out of the market and many vulnerable Kiwis were instead forced to borrow from high-interest loan sharks."
The Government also says the changes "will make the home loan application process simpler for hardworking Kiwis who have diligently saved to buy a house."
Bayly reiterated the Government plans to transfer oversight of the CCCFA to the Financial Markets Authority from the Commerce Commission.
"The FMA is already the conduct regulator for the financial sector. Moving the CCCFA into their remit, makes sense as it relates to financial conduct. This change better aligns with the existing roles and responsibilities of the various financial service regulators," he says.
The Government's announcement was welcomed by both bank lobby group the New Zealand Banking Association (NZBA), and the Financial Services Federation (FSF), lobby group for non-bank lenders.
"We welcome the removal of overly prescriptive affordability assessment requirements because it should help fix the one-size fits all approach that treated all types of lending and borrowers the same. The change still means that consumers are protected, and lenders need to be responsible," NZBA Chief Executive Roger Beaumont says.
FSF Executive Director Lyn McMorran says the changes are "a welcome return to commonsense and will make credit more accessible for all New Zealand consumers."
Meanwhile, Bayly also says local authorities will be exempted from the CCCFA to let them to administer voluntary targeted rates schemes, such as loans to install insulation or heat pumps, without incurring "unnecessary compliance costs."
This exemption will take effect by 25 April.
"This is only the first phase of financial reforms. We will open public consultation on a range of matters in the coming weeks, including other known pain points," Bayly says.
"Kiwis must be able to access financial services safely without unnecessary hurdles. These reforms reinforce our government’s commitment to provide regulatory clarity, protect vulnerable consumers, and grow the economy."
The information below was released by Bayly.
Fact sheet: Supporting better financial outcomes for Kiwis
Financial dispute resolution schemes
Today’s announcement is accompanied by changes to the dispute resolution scheme, which will improve dispute resolution services to better protect customers.
The rules of the four approved financial dispute resolution schemes will be aligned and the maximum amount the schemes can award will increase to $500,000. This means that more consumers will be able to settle financial disputes without going to court.
A further step for improving access to high quality dispute services is the Government’s support for the proposed merger of the Insurance & Financial Services Ombudsman Scheme (IFSO) and the Financial Services Complaints Limited (FSCL) from 1 July 2025, which was announced earlier this week (Friday 19 April). This will help streamline services, create operational efficiencies, and remove duplication.
The four approved financial dispute resolution schemes are the Banking Ombudsman, the Insurance and Financial Services Ombudsman, Financial Services Complaints Limited, and the Financial Dispute Resolution Service.
New role for Financial Markets Authority
Today’s announcement follows the proposal to transfer the responsibilities for overseeing CCCFA from the Commerce Commission to the Financial Markets Authority, announced by Minister Andrew Bayly in January this year.
FMA is already the conduct regulator for the financial sector. Moving the CCCFA into their remit, makes sense as it relates to financial conduct. This change better aligns with the existing roles and responsibilities of the various financial service regulators.
Financial services reforms
Cabinet has agreed to the following phase one changes:
♦ The rules for the four approved financial dispute resolution schemes are being aligned. The regulations providing for Dispute Resolution Scheme rules changes will be in place by 18 July. Financial Service Providers (Rules for Approved Dispute Resolution Schemes) Regulations 2024.
♦ Local authorities will be exempted from the CCCFA to allow them to administer voluntary targeted rates schemes – such as loans to install insulation or heat pumps – without incurring unnecessary compliance costs. This exemption will take effect by 25 April.
Credit Contracts and Consumer Finance Amendment Regulations 2024.
♦ Entities whose primary business is non-financial goods and services, such as certain car dealers, will be fully exempted from duplicative reporting requirements under the CCCFA by 25 April. Credit Contracts and Consumer Finance Amendment Regulations 2024.
♦ The detailed requirements for assessing the affordability of loans will be revoked in coming months.
♦ The Responsible Lending Code will be updated to clarify for lenders how they are expected to ensure lending is affordable once the affordability regulations have been revoked.
♦ Redundant Covid-19 exemptions from the CCCFA will also be removed.
Phase two reforms:
The next stage of reforms will further streamline the CCCFA, Financial Markets (Conduct of institutions) Amendment Act 2022 (CoFl) and Financial Service Providers (Registration and Dispute Resolution) Act 2008. Public consultation on these reforms will commence in the next few weeks.
Cabinet has agreed to progress the following phase two changes:
♦ Reviewing the CCCFA to address areas of under-performance, including the liability settings and disclosure obligations.
♦ Reviewing the CCCFA’s high-cost credit provisions to ensure there is adequate regulation surrounding these lending practices.
♦ Improving the effectiveness of the financial dispute resolution system.
♦ Making amendments to support transferring responsibility for the CCCFA from the Commerce Commission to the FMA.
♦ Clarifying the requirements of the CoFI regime and reviewing the conduct licensing framework in the Financial Markets Conduct Act to ensure there is balance and flexibility.
26 Comments
A whiff of desperation - as we could have well anticipated.
Reminds me of my youth - out of money, motorbike splutters to a halt on reserve, and optimistically trying to kick-start it into life.
The debt ponzi is fully tapped-out; indeed if we run the combined total against the remaining repayment time/potential, it's already overshot. So a reconciliation is an inevitability.
One would feel sorry for them, if it weren't for the arrogance...
It was a silly Labour policy, best removed. The simple rule is if you don’t want to go broke, don’t borrow the money. Regardless of what you do, people will find a way to borrow beyond their means and go broke. I agree with you though. Debt ponzi is tapped out. I have none, I’m just waiting for the cheap assets to become available, which they soon will.
I mean....All of us on here take an interest in financial stuff so easy to tell people less financially savvy to "get smart" and don't go broke borrowing. But these people might not be intelligent enough to get their head around it and let's not forget who's deriving an income/profit from this lending.
If a business is out to derive an income from an activity, then that's where I'd place the responsibility and care. Even in my line of work as an Estimator, I'll often point out something specified is not suitable for the application and this is on a set of engineer approved drawings. I could just price "conforming" and then go "ha-ha it's on the drawings suckers that'll teach you for trying to cut costs" but why?
Rather than hating on people less knowledgeable, why can't we have a mature society where those with skills and experience actually look out for those that don't? Oh, capitalism...
I don't understand why there are not rules around lending simply related to the interest rates. people are sucked into these lending companies for whatever reason, and the deals are laden with all sorts of fees and penalties which in many cases add up to more than the interest, in the end, that is what sinks people, and it is not the banks doing it. So, applying these silly rules to mortgages was pointless, as it should have targeted specifically these types of fringe ripoff lenders, but of course in true Labour fashion it targeted and punished everyone rather than just the actual offenders.
Agreed. One rule I can think of would be making the bank's test rates be the maximum interest rate that loan can incur over its lifetime. Put it on the loan document. That way you don't have people being tested at 5.5% one year on a 2.5% card rate, and then refixing 12 months later at over 7%.
It may result in the banks testing at a higher rate to cover the added risk, but is that really a problem? Presumably everybody who takes out a mortgage (investors etc) would be "impacted", lending dollar amounts would fall and who actually misses out?
Mortgage rates are different. They go up and down with the market obviously, and people have 1-5 year teams or float. People have to deal with what is dished out and that has always been the case. The problem is the lenders that lend say 1000 bucks and the people miss a few payments, or make the minimum payment and the balance ends up at 6000 even after they paid by 5000. That stuff needs to go. Not the mortgages, they are fine.
I'm assuming the legislation preventing these high cost loans running out of total control hasn't been thrown out also?
https://communitylaw.org.nz/community-law-manual/chapter-25-credit-and-…
This was the only piece of new law to come from Labour worth the paper it was written on IMHO, where fees, interest and penalties could not exceed 100% of the initial loan
Seems to me that the changes aim to reduce the number of people seeking small emergency loans from MSD and to point them back at the private sector, which in most cases (such as the example given in the article) will be loan sharks/lenders with punishingly high interest rates and penalties.
….and the people that got refused home loans because they went to Kmart and Maccas to often. They are actually the lucky ones, because the housing market crumbled and still is….and would have wiped these people’s equity if they were allowed to borrow, so it did have some positive effect for some, but overall the policy was a badly thought out stinker, much like the previous government overall.
And the reason why borrowers will be stuck with punishingly high interest rates and penalties is because that's all that is left now - all the providers who used to loan money at reasonable rates have shut down their personal lending businesses due to the cost of providing those loans. Most of them now only do car financing. And the ones that are left now have even higher interest rates and fees than before, to cover the cost of processing the loans.
Denying someone $500 to fix their car means they are left without transport, which means they probably lose their job as well. Then they are even broker then they were before. Then the taxpayer gets to pay for everything as they end up on a benefit.
Pretty much everything the Labour Govt touched had the opposite effect of what was intended. People locked out of the housing market, tenants stuck with escalating rents, people forced to borrow from gang run loan sharks ......
Denying someone $500 to fix their car means they are left without transport, which means they probably lose their job as well. Then they are even broker then they were before.
Reminds me of an interview from a dodgy "criminal" loan shark I watched recently in the UK, balaclava and all. Asked why he charges so much interest, he said these people cannot get finance from the usual lenders and in many cases he's saved people from losing their houses.
If my only option to keep the house was to borrow $20k, pay $40k in interest, I'd sure as hell do that too.
Waiting for the "ponzi" comments to flood in as usual...
The CCCFA changes were garbage and symbolized Labour's inability to implement economic policy that actually worked as intended. Designed to prevent predatory lending (a good thing), people got locked out of home ownership because they had bought a couple of buckets of KFC. Then it took MONTHS to get them eased even a little bit. The assumption that folks wouldn't dial back on takeaways when they had a mortgage so they needed a law to protect them from themselves. What a joke.
Not to mention things like having to go through the whole process to do something like increase the credit limit on an existing card. Huge PITA. Which isn't to say that there shouldn't have been something about predatory lending, but the CCCFA as-is was not the solution.
Just preparing the ground for the next round. Banks are dragging out the process for troubled borrowers as long as they can. Not to protect the borrowers but to protect the banks. Just trying hold on until the OCR is eventually cut. Then more credit can be issued and people can lower payments or sell.
Trouble is that dual income households cannot service their mortgages or their rent when one person loses their job.
I was reading the other day about a US borrower who couldnt afford their mortgage payments so it was refinanced into a 52 year mortgage. In the US there is also a fast growing market for second mortgages, so borrowers can unlock cash without having to refinance their current cheap mortgage. Its so huge now that even Freddy Mac wants in on the action.
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