Lending rule tweaks won’t help most consumers

Tweaks to new consumer lending rules released today won’t make much difference for most people seeking credit says the New Zealand Bankers’ Association.

Changes to the Credit Contracts and Consumer Finance Act introduced last December had an immediate dampening impact on the availability of consumer credit.

“The government’s rushed attempt to fix the problem hasn’t made things easier for consumers seeking credit. Instead, it’s raised hopes of a solution that hasn’t been delivered,” says New Zealand Bankers’ Association chief executive Roger Beaumont.

“We don’t think the tweaks published today will make a big difference for most borrowers. That’s because most of the existing requirements remain in place, meaning customers will still have to provide detailed information about their spending, resulting in a more painstaking process and more loan applications being declined than before the December rule change.

“While we agree with the government’s aim to protect vulnerable consumers from unscrupulous lenders, the one-size fits all approach for all lenders and all loan types means banks don’t have the same discretion or flexibility they used to.

“We look forward to the outcome of the ongoing Council of Financial Regulators review. We believe that by working with government and organisations like FinCap, we can find a way to both protect vulnerable consumers from unscrupulous lenders and ensure a less restricted flow of credit to those who can afford it.”

NZBA’s submission on the proposed tweaks sets out why the tweaks don’t go far enough and is available here: https://www.nzba.org.nz/2022/05/02/credit-contracts-and-consumer-finance-regulations-2004-and-responsible-lending-code-exposure-draft/.