The Ministry of Business, Innovation and Employment (MBIE) has announced its “fit for purpose” financial services reform consultation. This consultation follows recent announcements from the Commerce and Consumer Affairs Minister Andrew Bayly (Minister) in relation to upcoming reform in this area.
A link to the consultation website (and discussion documents) can be found here. Submissions close on 19 June 2024. MBIE will be hosting a webinar for general information on the overall reforms at 10am on Wednesday, 29 May 2024. Registration for the webinar can be found here.
Who needs to read it? Why?
These reforms will likely be very significant to banks or other institutions who offer consumer credit or retail banking products. In relation to consumer credit, a number of the discussion topics and questions touch on very significant matters – such as director and senior manager liability provisions and disclosure obligations. The consultation also discusses a proposal to lower the interest rate threshold for high-cost consumer credit contracts from 50% to 30%.
The Conduct of Institutions regime reforms will also be of relevance to financial institutions who will be subject to licensing under CoFI (defined below).
What does it cover?
The consultation seeks feedback on proposed changes to how financial products and services are regulated in the consumer credit, financial services conduct and financial dispute resolution space. MBIE has published separate discussion documents in relation each of these three areas.
Consistent with previous communications from the government, MBIE has stated that the objectives of the reforms are to:
- simplify and streamline regulation of financial services (including reducing duplication);
- remove undue compliance costs for financial markets participants; and
- improve outcomes for consumers.
The ambit of the consultation documents is broad and covers proposed reforms to:
- the Credit Contracts and Consumer Finance Act 2003 (CCCFA);
- the Financial Markets (Conduct of Institutions) Amendment Act 2022 (CoFI); and
- streamline New Zealand’s financial dispute resolution system.
The Minster has previously expressed his views that:
- the successive reforms have tended to place greater responsibility and disproportionate regulatory burden on the financial sector, leading to excessive layering of regulation and a loss of coherence across legislation;
- the legislative and regulatory changes that have occurred over the past decade have contributed to a reduction in clarity and increased the regulatory burden for financial market participants; and
- the existing regulatory environment needs simplification to help promote fair, efficient and transparent markets, and improve outcomes for consumers.
We agree that the consultation gives the industry a great opportunity to reduce complexity and regulatory risk.
What next?
We recommend all banks and financial institutions engage in the consultation process by familiarising themselves with the discussion documents and providing input on matters that are significant to them.
We will provide updates as we learn more about the reform consultation and the changes the reforms may bring to financial products and services. In the meantime, we encourage banks and financial institutions to carefully consider the issues that MBIE is seeking feedback on and provide this feedback in good time before submissions close.
Our experts would be happy to discuss any aspect of the consultation or reforms process outlined above.
This article was co-authored by Andrew Walker, a Law Clerk in our Financial Services team.
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