Mortgage advisers welcome CCCFA reform, but more detail needed

Brokers are welcoming changes just announced to the Credit Contracts and Consumer Finance Act (CCCFA).

But they also need more detail about how and when they will be implemented.

The reforms were unveiled in the early hours of the morning by the Minister of Commerce and Consumer Affairs, David Clark.

Amongst the changes are the removal of regular 'savings' and 'investments' as examples of a would-be borrower's outgoings.

They also want a borrower's future living expenses benchmarked against robust statistical data, without a need to enquire into recent bank transactions.

This is an apparent reference to the notorious cup of latte which got added to would-be borrowers' outgoings.

These changes followed a storm of criticism that an Act intended to protect vulnerable borrowers ended up penalising almost everyone.

In a response to the Government announcement, Glen McLeod of Edge Mortgages said the changes were good but the law should never have been passed in the first place.

He said it did not recognise how responsible citizens actually behave.

“The people who are buying houses have a willingness to save money in an environment where it is hard to save money, and they are prepared to change their spending habits,” he said.

“Once they buy a house, the first thing they pay is their mortgage. They live according to their new budget. The law did not take that into account.”

Loan Market adviser Bruce Patten said the changes were almost everything he could have hoped for.

“I think it will go a long way because it is going back to our previous common sense approach which is that you do a credit check.

“If people have a bad credit check, there is an issue, but if they have got a very clean credit record, and they have disclosed their expenses, then we can say they know what they are doing.”

However, Lyn McMorran of the Financial Services Federation was less enthusiastic. She said Clark's announcement needed far more detail before it was clear what impact it would have.

As an example, she cited the Minister's promise that there would be 'guidance' in cases where it was ‘obvious’ that a loan would be affordable.
In that case, a full income and expense assessment would not be required.

“Where is this guidance, I haven't seen it,” McMorran said.

“There's no detail as to when this comes into effect. Is it immediate, is it today? The Minister's office has sent me nothing, we have been kept completely in the dark.

“They have sent information to the media, could they send it to lenders, please?”

Katrina Shanks of Financial Advice NZ also had doubts about how clear and thorough the Minister's statement really was.

“They are not saying they are actually changing the responsible lending code, or the regulations. They have just put four bullet points at the top of a statement without actually saying what they are going to do with them.

“There is just not enough detail.”

Shanks also raised concerns about the fate of an enquiry into the act which is being carried out by MBIE and the Council of Financial Regulators, and is still part way through.

In his statement, Clark said that enquiry was ongoing and the latest changes were not the end of the matter.

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