Government makes practical changes to responsible lending rules

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The government is making practical changes to responsible lending rules to limit unintended consequences caused by the Consumer Credit Agreements and Finance Act (CCCFA), Minister of Commerce and Consumer Affairs, David Clark.

The law, which came into force on December 1, 2021, requires lenders to follow a rigorous process and ensure loans are affordable and suitable.

“The changes we are making are informed by feedback I have received from banks, other lenders and consumers and fit comfortably within the spirit of the law,” David Clark said.

“These initial changes ensure Kiwis ready to borrow can still access credit as we continue to protect those most at risk from predatory and irresponsible lending.

“There is no doubt that banks, budget advisers and the government are all on the same page when it comes to supporting the intent of the law – we want to prevent vulnerable people from ending up with unaffordable debt. .

“Following my meetings with the banks late last month to hear their concerns, I detected little enthusiasm for wholesale changes to the law, but rather a preference for some practical amendments to be made to ensure that the objectives of the legislation are better achieved .

“In the meantime, a wider investigation, by the MBIE and the Board of Financial Regulators, into the rapid implementation of the CCCFA changes is underway.

“So far, surveys have given no reason to believe that the CCCFA is the main driver of the loan cuts. The Reserve Bank’s December figures highlight seasonal variations as a significant contributor. fact, December 2021 was still above the trends of the same month in 2017, 2018 and 2019.

“It’s also important to note that banks may be managing their lending more conservatively and this is likely due to global economic conditions. And a number of market-affecting factors have happened alongside the CCCFA changes. , including increases in OCR changes, LVR changes and increases in property prices and local government rates.

“It should be emphasized that today’s changes are not the final word and any further changes to credit laws and the Responsible Lending Code will be considered part of the rest of the investigation which is due to take place on next month,” said David Clark.

(With contributions from the New Zealand government press release)

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