CCCFA and financial adviser reforms not well implemented; Bankers Association

The Bankers Association has given more examples of how difficult it can be to comply with government regulation.

The issue emerged after some parting comments from the outgoing SBS Bank chief executive Shaun Drylie. 

Drylie said banking staff were often so busy complying with government regulations they had little time left for developing new, innovative banking products or services.

The chief executive of the Bankers Association, Roger Beaumont, agreed with this view.  

He said the government would often issue requirements of the banking sector that had to be achieved by a set date. 

But as that date approached, vital information on how to comply was not forthcoming.

It would often arrive late in the process, meaning banks sometimes had to scramble to meet a deadline that could have been dealt with easily.     

Pressed for some examples, Beaumont described changes to the Credit Contracts and Consumer Finance Act 2003.

These were intended to prevent people taking on unaffordable debt, and the association agreed with that aim, which involved cracking down on unscrupulous lenders.

Banks were caught up in this along with cowboy lenders and Beaumont had no problem with this. But it was not handled well. 

“The new regime means banks need to gather and verify more information from loan applicants...the bulk of the new changes were set to come into force on October 1 this year,” Beaumont said.  

“Early on we sought an extension to the implementation date due to the complexity of implementing the new requirements, which involve significant changes to lending policies, processes, IT systems, and staff training.

“The government declined requests for an extension on those grounds.”

It was only the Covid alert level 4 lockdown in August that led to the Government accepting the banks' argument that an extension was needed, and the deadline was pushed out from October 1 to December 1.

But Beaumont argued the need for an extension of time was well established before Covid hit. 

Another example was the new information disclosure requirements for financial advisers, where the deadline for implementation was completely unrealistic.  

Beaumont said the Financial Services Legislation Amendment Act 2019 was a complex piece of legislation and was given just seven months for implementation.  

In the end the banks needed, and were able to get nine more months to do the work, and the scheme came into effect in March this year. 

Beaumont said good regulation worked best with input from industry on the feasibility of implementing any new requirements.  

His organisation often agreed with the aims of regulatory changes, but the implementation time frames were often impractical. 

TMM sought a response to this from the Minister of Finance Grant Robertson. His office referred us to the Minister of Commerce and Consumer Affairs, David Clark, for comment.

In the end, Clark's office came back with a statement that did not really address the matters raised by Drylie and Beaumont.

Instead, it mainly re-iterated the Government's goals of protecting consumers from high cost loans and unaffordable debt.

The statement did say the changes had been implemented after several rounds of consultation with the industry. 

And the statement conceded that lenders would need to make significant changes to their processes in response to these requirements.

However, it said the changes were crucial to reduce the harm caused by irresponsible lending.  

The statement concluded by saying banks had in fact been given an extension of time because of Covid, but did not explain why earlier requests for an extension were denied.

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