Second tranche of CCCFA changes announced

The Government has unveiled a second tranche of proposed changes to the Credit Contracts and Consumer Finance Act (CCCFA).

They generally aim to increase flexibility for both lenders and borrowers.

The CCCFA was condemned for smothering advisers and lending institutions in red tape and blocking finance to solvent and even prosperous people.

It was reviewed within two months of being passed and preliminary changes were unveiled in April.

A second tranche of reforms has now been disclosed by the Minister of Commerce and Consumer Affairs, David Clark.

They aim to narrow the expenses of would-be borrowers that must be considered by lending institutions such as banks.

The changes would exclude discretionary expenses more explicitly, according to documentation by the Ministry of Business Innovation and Employment (MBIE).

“This aims to alleviate the disproportionate enquiries made by lenders and reduce their overestimation of borrower expenses,” the Ministry wrote.

“The changes will ease conservative assumptions lenders are required to make about expenses associated with revolving credit contracts, particularly credit cards and buy-now pay-later schemes.”

The changes were also aimed at various ways of restructuring debt.

“The changes will allow for debt refinancing or consolidation where it would make debt more manageable, ensuring lenders and borrowers can go through a faster process while improving access to safe credit for consumers,” the Ministry document stated.

The Ministry went on to say the details of these changes would be open to comment from across the financial sector.

Debate would open on September 22 and it was hoped the changes would be in place by next March.

A cabinet paper that preceded these changes contained a kind of guilty plea by the Government regarding the impact of the law.

“Some unintended impacts are emerging,” the cabinet paper wrote.

“These include more borrowers across all lending types who should pass the affordability test are subject to declines of credit or reductions in credit amount.

“Borrowers are subject to unnecessary or disproportionate inquiries that are perceived by them as being intrusive."

“Lending processes, in practice, have become more restrictive and onerous than was expected when the CCCFA changes were made. This is a consequence of the way several specific provisions in CCCFA regulations are designed and drafted, combined with interpretational difficulties, and many lenders taking a more conservative approach to compliance than anticipated, given the CCCFA’s strong liability regime.”

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