As both lenders and the general public (due to increased media coverage) are aware, 1 December 2021 saw significant amendments made to the:
- Credit Contracts and Consumer Finance Act 2003 (CCCFA); and
- Credit Contracts and Consumer Finance Regulations 2004 (Regulations).
These amendments saw the implementation of prescriptive rules around, among other things, lenders assessing a borrower’s suitability and affordability for a loan. You can read more about our discussion on the amendments (including the affordability and suitability assessment) here.
On Friday, the office of The Right Honourable David Clark (Minister of Commerce and Consumer Affairs) released a statement about practical amendments to the new responsible lending rules to curb unintended consequences from the 2021 amendments. This statement comes off the back of many reports of consumers missing out on loans due to their coffee spending habits or online service subscriptions.
The following changes have been proposed, and as we understand, agreed to by Cabinet:
- Clarifying that when borrowers provide detailed breakdown of future living expenses there is no need to inquire into current living expenses from recent bank transactions.
- Removal of regular ‘savings’ and ‘investments’ as examples of outgoings that lenders need to inquire into when completing an affordability assessment.
- Clarifying that the requirement to obtain information in ‘sufficient detail’ only relates to information provided by borrowers directly (i.e. through conversations with a borrower) rather than relating to information from bank transaction records.
- Providing alternative guidance and examples for when a loan is ‘obviously’ affordable, meaning an affordability assessment is not required.
You can read the full statement from Minister Clark’s office here.
While the devil will be in the detail, we expect the announcement on Friday will come as a relief to many lenders while we wait for the Ministry of Business, Innovation and Employment and the Council of Financial Regulators to release their report on the current inquiry into lending laws next month. This inquiry may lead to further changes to the CCCFA and Regulations being proposed which we expect will also be appreciated by lenders.
If you have would like to discuss the CCCFA, Regulations and what these changes announced might mean for you and your business, reach out to one of our experts below.
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