COA News 2024


The government announces changes to lending and financial services reform

The government has announced it will reform financial services in a bid to make it easier to get home loans and other loans, and strengthen customer protections.

Minister of Trade and Consumer Affairs Andrew Bayly and Minister of Housing Chris Bishop made the announcement on Sunday afternoon. It comes as part of the National-ACT Coalition agreement to update the Credit Contracts and Consumer Finance Act.

Bayley said regulations introduced by the previous administration created unnecessary compliance costs and an excessive barrier to lending.

“We are withdrawing 11 pages of overly prescriptive affordability rules, introduced by the last government, to enable Kiwis to access finance with confidence,” Bayly said.

“When the affordability rules were introduced in the Credit Contracts and Consumer Finance Act 2003 (CCCFA) in December 2021, it threw a bucket of ice over banks and financial services providers by requiring minimum steps to assess the affordability of a loan.

“The excessive checks caused loan processing times to increase dramatically. Lenders told me that a small loan that used to take two hours to process suddenly took eight hours.”

He said it became very difficult for people to borrow $500 to fix their cars, forcing them to go to loan sharks with high interest rates.

The changes still require lenders to act responsibly, but they should not have to follow a prescriptive, one-size-fits-all process, he said.

Housing Minister Chris Bishop said the time it took to process a home loan had increased significantly, making it harder for people trying to enter the market.

“Home buyers have had a hard enough time under Labor over the last six years, with extraordinary house price inflation, skyrocketing interest rates causing untold pain, and these ridiculous CCCFA changes making it much harder to get a mortgage ,” Bishop said. said.

The detailed requirements for assessing loan affordability are expected to be withdrawn in the coming months.

The Responsible Lending Code will be updated to clarify for lenders how they are expected to ensure that lending remains affordable once the affordability rules have been withdrawn.

Unnecessary Covid-19 waivers from the CCCFA will also be removed.

Part of Sunday’s announcement includes changes to the dispute resolution scheme, exempting councils from the CCCFA and removing some “duplicate” reporting requirements.

What are the changes in the dispute settlement procedure?

The government said it would split the changes into two phases. Phase one includes changes to lending, as above, and some of the below.

The rules of the four approved financial dispute resolution schemes – the Banking Ombudsman, the Insurance and Financial Services Ombudsman, Financial Services Complaints Limited and the Financial Dispute Resolution Service – will be aligned and the maximum amount the schemes can award will be increased to $500,000.

The regulations governing the changes will come into force by July 18 at the latest.

The government also supports 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 on 19 April.

The government hoped this would help streamline services, create operational efficiencies and avoid duplication of effort.

Exemptions under CCCFA

By April 25, local governments will be exempt from the CCCFA, allowing them to administer voluntary targeted rate schemes – such as loans to install insulation or heat pumps – without incurring unnecessary compliance costs.

On the same date, entities whose primary activity consists of non-financial goods and services, such as

certain auto dealers will be completely exempt from duplicative reporting requirements under the CCCFA.

New role for the Netherlands Authority for the Financial Markets

Earlier this year, Bayly had announced that responsibilities for overseeing the CCCFA would be transferred from the Commerce Commission to the Financial Markets Authority (FMA).

The minister said this change is more in line with the existing roles and responsibilities of the various financial services regulators.