CCCFA reform inches forward; cabinet paper admits to flaws

Mortgage advisers look like having to comply with the current state of the Credit Contracts and Consumer Finance Act (CCCFA) until June.

Until then, they will have to stick with rules that all sides agree have harmed responsible, as well as vulnerable would-be borrowers.

The government last week announced partial reforms of the rules while persisting with a fuller investigation through until April.

The first tranche of this two-tranche process includes removing regular savings and investments from the list of a would-be borrower's costs, and ending the need to comb through bank statements where robust financial data is already available.

For some time after this decision was announced, lending industry leaders only knew what they had heard from the media, and they complained of Government by press statement.

But a subsequent email from the Ministry of Business Innovation and Employment (MBIE) has given more information.

The email said MBIE officials were “progressing the work necessary to give effect to the initial changes already agreed.”

There would be a “further update when the initial changes are released for public consultation.

“As outlined in the Cabinet paper, a draft of the regulations and Code changes will be publicly released for comment, with a view to these initial changes being in force by June 2022.”

The time frame for any subsequent changes from the second tranche of the process remains unclear.

Meanwhile, a Cabinet paper released by MBIE contained admissions that the law had produced unintended consequences and could even make some things worse for some borrowers.

It said access to credit had been impacted in a “less targeted way and to a greater extent than intended”.

The paper said processing times were longer and the cost of compliance was sometimes higher.

In addition, consumers facing close scrutiny from lenders expressed worry about their personal privacy.

In some cases they would even be prevented from refinancing an existing loan at a cheaper rate. In extreme cases, they could even be driven into the arms of black-market lenders whom the law was designed to protect against.

The cabinet paper also quoted figures from the Reserve Bank (RBNZ) about the financial cost of all this.

They showed a drop in new mortgage commitments from $9.1 billion in November to $7.9 billion in December.

There was, though, some debate about the seasonal impact on these raw figures. So the RBNZ produced a so-called ‘steady state’ figure. This still showed a drop, but a smaller one, from $9.1 billion to $8.3 - $8.6 billion.

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