Significant changes to the Credit Contracts and Consumer Finance Act (CCCFA) will be made under a National-led government.

National’s Commerce and Consumer Affairs spokesman Andrew Bayly says it will stop banks asking intrusive questions of borrowers’ spending habits when they apply for a housing loan.

Under the law, banks go further than ever before in checking they are lending responsibly and can’t just rely on information given.

Changes to the CCCFA in 2021 required banks to break down applicants’ spending habits before approving loans, going as far as requesting explanations for deviations as little as $5.

At the time the changes were made the Financial Services Federation, Financial Advice NZ, banks, the NZ Banking Association and others told the government the rules were going to be too restrictive. Most consumers did not want them, and most were not in vulnerable circumstances; they just wanted access to credit and didn’t want to have to answer a lot of intrusive questions to get it.

‘Unpleasant Process’

And that’s precisely what’s happened, says FSF executive director Lyn McMorran. “It’s restricted access to credit and made it an unpleasant process for most borrowers.”

Banks enquired into borrowers’ social life, hobbies and, for example, how much was spent on parking. Until recent tweaks to the act, borrowers found every single transaction was analysed and questioned.

Bayly says National will maintain tight restrictions on predatory lenders, but “significantly reduce” the scope of changes made by Labour to the CCCFA, which have “proven unworkable”.

Although Bayly says he can change the rules, it might be more difficult to transform the culture within banks. “The CCCFA rules are now sort of semi-embedded in banks.”

Cultural Change

“That cultural change is going to be quite an issue. I think we can make the changes, but actually driving those changes through the banks is going to be difficult,” he says.

He wants to take the CCCFA back to the original 2020 65-pages of regulations focused just on high-cost lenders. “What we want to do is repurpose it towards what was parliament’s intent.

“Instead of having a prescriptive approach, we would rather say here is the boundary we want you to work within. Now, you work out what’s right for your specific business. If you get it wrong, we’ll be after you.”