They declare the investigation will analyse the reported outcomes of the CCCFA and whether they’re attributable to the Act’s intended protections.
They will also look at intended and unintended consequences, and consider the impact of external factors like the global economic situation.
The problem of unintended consequences are one of the main complain from people who are upset at the CCCFA, which came into effect last December.
The critics say the law was supposed to target predatory lenders but in fact throttled almost everyone in red tape.
Lenders were forced to follow prescribed paths instead of applying their expertise specifically to each borrower.
Some would-be borrowers suddenly found they could not get the loans they were counting on and were eligible for previously, because expenditure on lattes and hamburgers were counted as part of their financial records.
A storm of protest developed as the law was implemented, and an enquiry was promised 17 days ago by the Minister of Commerce and Consumer Affairs David Clark in response to this repeated criticism.
His office said at the time it would be a low key affair, but it has since grown in stature, and Clark authorised Terms of Reference for the investigation over the weekend.
The enquiry is being done by the Council of Financial Regulators, which comprises organisations like Treasury, MBIE, the Financial Markets Authority and others. It has been asked for a preliminary report by mid February, with the final report due in April.
The terms of reference have just been published on the MBIE website and make clear the goal of the inquiry.
“The objective of the investigation is to identify any impacts of the recent CCCFA changes that came into force on 1 December 2021, considering the scale and nature of the impacts, to assess what, if any, further actions are needed,” the document reads.
“The scope of the investigation is to look at the intended or unintended impacts, beyond those expected by the initial implementation, of the parts of the Credit Contracts Legislation Amendment Act 2019 and Credit Contracts and Consumer Finance (Lender Inquiries into Suitability and Affordability) Amendment Regulations 2020, that came into force on 1 December 2021.
“This is primarily in relation to mortgage, but also other lending, by banks and non-bank lenders in the current consumer credit market.”
The emergence of the terms of reference follows a meeting between MBIE officials and representatives of the five big banks last week.
A follow up meeting between the Minister and the heads of those banks has been requested for this week.
