Hon Andrew Bayly
Minister of Commerce and Consumer Affairs
Hon Chris Bishop
Minister for Housing

Strict loan affordability requirements and arduous, overly prescriptive checks are a thing of the past, say Commerce and Consumer Affairs Minister Andrew Bayly and Housing Minister Chris Bishop.

“From tomorrow, 31 July, eleven pages of overly prescriptive affordability regulations will no longer be part of the Credit Contracts and Consumer Finance Act (CCCFA), in a move that will enable Kiwis to access finance with greater ease and confidence,” Mr Bayly says.

“The affordability regulations stipulated very specific requirements a customer had to satisfy before being able to take out a loan. The hoops customers had to jump through resulted in a confusing and stressful process.

“Not only was it inefficient and frustrating for customers, but it also significantly increased the burden of compliance, leading to increased costs for lenders. This had a particularly chilling effect on lenders’ ability to offer small loans of under $5,000.”

“Many Kiwis who applied for home loans while the regulations were in place will remember the immense stress caused by the screeds of information and disclosures they had to provide,” Mr Bishop says.

“The regulations treated people like children and required lenders to do things like check whether the information provided by an applicant about their personal expenses was in line with information held by Stats NZ about the cost of living.

They had to explain why they bought an occasional coffee, or why they treated the family to fish and chips every now and again, even when they could clearly afford to.”

Removing the CCCFA affordability regulations fulfils part of the National-ACT coalition agreement which commits to rewriting the CCCFA to protect vulnerable consumers without unnecessarily limiting access to credit.

“In place of the prescriptive requirements, we have updated the Responsible Lending Code to provide guidance for lenders on how to make reasonable inquiries to assess the affordability of a loan,” Mr Bayly says.

“The updated Responsible Lending Code manages the risk of unaffordable lending while providing lenders with flexibility to assess affordability on case-by-case basis, taking into consideration individual circumstances.

“Lenders must continue to properly assess affordability and we expect failure to do so will be appropriately enforced. The CCCFA includes clear penalties for lenders who fail to make reasonable inquiries that the loan is likely to be affordable.

“We consulted with lenders and budgeting services as part of the changes, and many lenders are supportive, having seen firsthand the perverse outcomes that the prescriptive requirements had.

“It is in no one’s best interest to loan money to people who cannot afford to pay it back.”

“Today is all about restoring flexibility and freedom to Kiwis who are working hard to get ahead and just want to the government to get out of the way so they can get on with their life,” Mr Bishop says.

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