a sharp drop in loan approvals by banks and non-bank lenders. Accordingly, the government requested the Council of Financial Regulators to launch an investigation in order to determine if the new rules are being implemented by lenders in the manner that was intended. On Friday, less than four months since the Credit Contracts and Consumer Finance Act took effect, Commerce and Consumer Affairs Minister David Clark announced changes to the law in view of concerns raised by consumers and mortgage brokers.
The legislation came into force on 1 December, and two months later, over 10,000 people signed a petition against it, expressing their frustration over borrowers being turned down for mortgages owing to their spending habits like takeaways and even seeing a counsellor. Now the Act has been amended in order to tackle these unintended consequences, Clark said. “The amendments we are making are informed by the feedback I received from banks, other lenders and consumers and sit comfortably within the intent of the Act,” the Minister noted. “These initial changes ensure borrower-ready Kiwis can still access credit while we continue to protect those most at risk from predatory and irresponsible lending.”
He went on to reaffirm the fact that the government, together with budget advisers and banks are on the same page in their support to the intention of the law, which is to “stop vulnerable people from finding themselves with unaffordable debt”. Some of the key changes include the clarification that borrowers do not need to inquire into current living expenses from recent bank transactions when providing details of their future living expenses. Moreover, regular savings and investments are to be removed as examples of outgoings into which lenders inquire. The government also went on to clarify that when information obtained by lenders in “sufficient detail” is limited to the information provided directly by the applicant instead of those from bank transaction records.
