The Government is moving to both make access to loans easier and bolster financial dispute resolution services, Commerce and Consumer Affairs Minister Andrew Bayly announced on Sunday.
Bayly says 11 pages of "overly prescriptive affordability regulations" for lending introduced by the previous Labour government will be revoked.
At the same time he says the rules of the four approved dispute resolution schemes will be aligned, and the maximum amount the schemes can award will increase to $500,000 so more consumers can settle financial disputes without going to court. Changes are to be in place by July 18.
Bayly says the Government will also support the proposed merger between two dispute resolution schemes, the Insurance & Financial Services Ombudsman Scheme (IFSO) and Financial Services Complaints Ltd (FSCL). The other two schemes are the Banking Ombudsman and the Financial Dispute Resolution Service (FDRS). Currently IFSO can’t award more than $200,000, while the Banking Ombudsman, FSCL and FDRS can’t award more than $350,000.
“When the affordability regulations were introduced into the Credit Contracts and Consumer Finance Act (CCCFA) in December 2021 it threw a bucket of cold ice over banks and financial providers by prescribing minimum steps to assess the affordability of a loan. The overly arduous checks meant the time it took to process loans dramatically increased. Lenders told me that a small loan that used to take two hours to process suddenly took up to eight hours," Bayly says.
"This meant it was no longer affordable for many providers to offer small loans. It became very difficult for everyday Kiwis, who need $500 to fix their broken-down car, to access a safe line of credit. They were effectively frozen out of the market and many vulnerable Kiwis were instead forced to borrow from high-interest loan sharks."
The Government also says the changes "will make the home loan application process simpler for hardworking Kiwis who have diligently saved to buy a house."
Bayly reiterated the Government plans to transfer oversight of the CCCFA to the Financial Markets Authority from the Commerce Commission.
"The FMA is already the conduct regulator for the financial sector. Moving the CCCFA into their remit, makes sense as it relates to financial conduct. This change better aligns with the existing roles and responsibilities of the various financial service regulators," he says.
The Government's announcement was welcomed by both bank lobby group the New Zealand Banking Association (NZBA), and the Financial Services Federation (FSF), lobby group for non-bank lenders.
"We welcome the removal of overly prescriptive affordability assessment requirements because it should help fix the one-size fits all approach that treated all types of lending and borrowers the same. The change still means that consumers are protected, and lenders need to be responsible," NZBA Chief Executive Roger Beaumont says.
FSF Executive Director Lyn McMorran says the changes are "a welcome return to commonsense and will make credit more accessible for all New Zealand consumers."
Meanwhile, Bayly also says local authorities will be exempted from the CCCFA to let them to administer voluntary targeted rates schemes, such as loans to install insulation or heat pumps, without incurring "unnecessary compliance costs."
This exemption will take effect by 25 April.
"This is only the first phase of financial reforms. We will open public consultation on a range of matters in the coming weeks, including other known pain points," Bayly says.
"Kiwis must be able to access financial services safely without unnecessary hurdles. These reforms reinforce our government’s commitment to provide regulatory clarity, protect vulnerable consumers, and grow the economy."
The information below was released by Bayly.
Fact sheet: Supporting better financial outcomes for Kiwis
Financial dispute resolution schemes
Today’s announcement is accompanied by changes to the dispute resolution scheme, which will improve dispute resolution services to better protect customers.
The rules of the four approved financial dispute resolution schemes will be aligned and the maximum amount the schemes can award will increase to $500,000. This means that more consumers will be able to settle financial disputes without going to court.
A further step for improving access to high quality dispute services is the Government’s support for 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 earlier this week (Friday 19 April). This will help streamline services, create operational efficiencies, and remove duplication.
The four approved financial dispute resolution schemes are the Banking Ombudsman, the Insurance and Financial Services Ombudsman, Financial Services Complaints Limited, and the Financial Dispute Resolution Service.
New role for Financial Markets Authority
Today’s announcement follows the proposal to transfer the responsibilities for overseeing CCCFA from the Commerce Commission to the Financial Markets Authority, announced by Minister Andrew Bayly in January this year.
FMA is already the conduct regulator for the financial sector. Moving the CCCFA into their remit, makes sense as it relates to financial conduct. This change better aligns with the existing roles and responsibilities of the various financial service regulators.
Financial services reforms
Cabinet has agreed to the following phase one changes:
♦ The rules for the four approved financial dispute resolution schemes are being aligned. The regulations providing for Dispute Resolution Scheme rules changes will be in place by 18 July. Financial Service Providers (Rules for Approved Dispute Resolution Schemes) Regulations 2024.
♦ Local authorities will be exempted from the CCCFA to allow them to administer voluntary targeted rates schemes – such as loans to install insulation or heat pumps – without incurring unnecessary compliance costs. This exemption will take effect by 25 April.
Credit Contracts and Consumer Finance Amendment Regulations 2024.
♦ Entities whose primary business is non-financial goods and services, such as certain car dealers, will be fully exempted from duplicative reporting requirements under the CCCFA by 25 April. Credit Contracts and Consumer Finance Amendment Regulations 2024.
♦ The detailed requirements for assessing the affordability of loans will be revoked in coming months.
♦ The Responsible Lending Code will be updated to clarify for lenders how they are expected to ensure lending is affordable once the affordability regulations have been revoked.
♦ Redundant Covid-19 exemptions from the CCCFA will also be removed.
Phase two reforms:
The next stage of reforms will further streamline the CCCFA, Financial Markets (Conduct of institutions) Amendment Act 2022 (CoFl) and Financial Service Providers (Registration and Dispute Resolution) Act 2008. Public consultation on these reforms will commence in the next few weeks.
Cabinet has agreed to progress the following phase two changes:
♦ Reviewing the CCCFA to address areas of under-performance, including the liability settings and disclosure obligations.
♦ Reviewing the CCCFA’s high-cost credit provisions to ensure there is adequate regulation surrounding these lending practices.
♦ Improving the effectiveness of the financial dispute resolution system.
♦ Making amendments to support transferring responsibility for the CCCFA from the Commerce Commission to the FMA.
♦ Clarifying the requirements of the CoFI regime and reviewing the conduct licensing framework in the Financial Markets Conduct Act to ensure there is balance and flexibility.
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