Specialist Lenders Welcome New Financial Reforms Announcements

The Financial Services Federation (FSF) welcomes the Government’s announcement on further plans to make it easier for Kiwis to access responsibly-provided credit when they need it.

The FSF is the industry association for specialist, non-bank lenders, with its members collectively reaching 1.7 million New Zealand businesses and consumers and providing crucial competition to registered banks through agility and innovation.

Two key announcements include:

• The intention to remove the personal liability for directors and senior managers of financial institutions and shift it back onto businesses.
• Lenders to transition to a licensing model, to bring consumer lending in line with other entities regulated by the FMA.

Personal Liability (Comment from Lyn McMorran, FSF Executive Director)

“Removing the substantial and unindemnifiable personal liability of directors and senior managers of consumer credit providers is a step in the right direction, says FSF Executive Director, Lyn McMorran.

“We support fair and robust enforcement penalties, however this has impacted the risk appetite for lenders and competition to banks, particularly for smaller lenders, as a $200,000.00 fine is a substantial personal liability for a director or senior manager of a small finance company.

“It’s ended up being a deterrent for good people to enter the sector and those already there to put their hand up for senior roles. It has not served New Zealand’s financial services system well, especially when we need to be boosting an environment for competition, and we are pleased that the Government is addressing this.

“These changes will still mean lenders have robust responsible lending obligations and must abide by the principle that they will not lend to people who cannot afford to repay, and enforcement of this law will be key.”

Licensing Model for lenders (Comment from Lyn McMorran, FSF Executive Director)

“In principle, we are not opposed to the transition of regulation for consumer credit transitioning from the commerce Commission to the Financial Markets Authority.

“The devil will however be in the detail, and we look forward to seeing the draft legislation once the consultation period opens.

“One thing we will be watching closely will be the new cost to lenders, and advocating for fair compliance costs that consider proportionality, not a one-size-fits-all.”

The FSF is pleased that the Minister is listening to the concerns of the sector, which will be addressed by both Minister Andrew Bayly and FMA Chief Executive Samantha Barrass at its conference on 22 October.

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