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Consumer Affairs Minister Craig Foss seeking submissions on proposed Responsible Lending Code

Posted in Personal Finance

Consumer Affairs Minister Craig Foss is calling for submissions on the proposed Responsible Lending Code, which will be introduced following the recent passing by Parliament of the Credit Contracts and Consumer Finance Amendment Act.

“Rewriting our consumer credit laws was a giant leap forward for lending practices in New Zealand,” Foss said. “Lenders must now operate with skill, care and diligence in all dealings with a borrower throughout the life of a credit contract."

“Adopting a Responsible Lending Code will increase protection for borrowers without imposing unnecessary compliance costs on lenders who already have good systems in place," said Foss.

The Credit Contracts and Financial Services Law Reform Bill was passed by Parliament in May. Primarily targeted at the likes of payday lenders and "loan sharks," it places a duty of care on lenders, and will see the introduction of a Responsible Lending Code following both Britain and Australia's lead. Responsible lending will be enforceable by both the Commerce Commission and borrowers.

Foss points out lenders must comply with the lender responsibility principles outlined in the Act, including:

· Helping a borrower reach an informed decision about whether to agree to a loan;

· Making reasonable enquiries to ensure the borrower can make repayments without suffering substantial hardship;

· Treating borrowers and their property reasonably, with respect and in an ethical manner;

· Ensuring the terms of the agreement and the exercise of powers by the lender are not oppressive;

· Meeting all legal obligations to the borrower.

Flexibility desired by banks

New Zealand Bankers' Association CEO Kirk Hope told interest.co.nz in May banks want a flexible Responsible Lending Code that acknowledges they are already responsible lenders and doesn't inflict "huge" compliance costs on them. Also in May Richard de Lautour, chairman of non-bank financial institutions' industry body the Financial Services Federation and CEO of third tier lender Instant Finance, said although he was in favour of 99% of the Credit Contracts and Financial Services Law Reform Bill, things were too heavily slanted in favour of borrowers.

 "It has become very heavily weighted in favour of the borrower and that's fine because it's designed to stop irresponsible lending and we fully support that. But somewhere I think that we must be getting to the point where it's time to put a little bit of obligation back on the borrower as well," de Lautour said.

For his part Foss said he looks forward to feedback on what should be included in the Code to establish market best practice.

Submissions close August 13, with the Code expected to be in place by next March.To make a submission go to: http://www.consumeraffairs.govt.nz/legislation-policy/changes-to-credit-laws

We welcome your help to improve our coverage of this issue. Any examples or experiences to relate? Any links to other news, data or research to shed more light on this? Any insight or views on what might happen next or what should happen next? Any errors to correct?

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3 Comments

How can the Banks possibly

How can the Banks possibly want acknowledgement that "they are already responsible lenders"?
Aren't these the same banks that, due to what presumably must have been irresponsible lending, brought the entire world to its financial knees.
These are the same banks selling peoples homes and bankrupting them - presumably nothing to do with them not having undertaken responsible lending processes in the first place.
These are the same banks offering people huge credit card limit increases - often based on next to zero information on the borrower.
And don't get my started on international Banks that have been fined for: Supporting money laundering and activities of drug cartels, Deliberately manipulating the Libor, Supporting US tax evaders etc.
Banks need a Responsibile Lending Code more than anyone else.

Banks need a Responsibile

Banks need a Responsibile Lending Code more than anyone else.
 
You are not wrong, but the authorised regulator of any legislatively imposed code needs to be above capture by those it oversees.
 
Even those most expected to spurn pleas for financial accommodation for past misdeameanours of the financially regulated seem to undertake actions that contradict their explicitly wriiten rules. Read more

There's two issues here, one

There's two issues here, one responsible lending, the other responsible borrowing. They are not mutually exclusive. The court system in this country is woeful. Take a leaf out of the Australian system and then perhaps we'll see some progress. Until then this will become nothing more than a talkfest.