The association says the Government's own experts produced some strong ideas which the Minister of Commerce and Consumer Affairs David Clark has ignored.
The CCCFA was accused of stopping banks, advisers and would-be borrowers from making otherwise workable deals with solvent people. It produced an outcry and preliminary reforms were announced in April.
The Government has now unveiled a second tranche of changes, which aim to exclude discretionary expenses of would-be borrowers more explicitly, and alleviate “disproportionate” inquiries made by lenders into the accounts of their clients.
They also aim to make debt restructuring more manageable.
The New Zealand Bankers’ Association chief executive Roger Beaumont has given some limited praise to the changes, saying they will make some lending easier.
But he said a report to the Government by the Council of Financial Regulators (COFR) had far better ideas than the ones chosen by the Minister of Commerce and Consumer Affairs David Clark.
That report upheld many of the complaints about the law, noting that it caused borrowers across all lending types who should pass the affordability test to have their loans declined or reduced.
These people also had to endure enquiries into their private lives that they found intrusive.
Overall, the COFR report found lending processes became more restrictive and onerous than was expected when the CCCFA changes were made.
The COFR report was an investigation, not a recommendation. Nevertheless, it raised several options that could be considered by the Government in future.
They include moving the affordability regulations away from general lending to specific areas, such as personal loans, motor vehicle lending, unsecured lending, or high-interest rate debt.
The rules could also be targeted not at the general public but at certain types of borrowers.
These would be people with a low credit score, high-debt-to-income ratios, a record of personal insolvency, or customers who were unknown to the lender.
The COFR report also raised the possibility that due diligence duties of directors and senior managers of financial institutions could be eased.
Specifically, these might include a reduction in the penalties that can be imposed on managers and directors, and it also raised the possibility of allowing them to indemnify themselves against liabilities.
These provisions led law firms like Minter Ellison Rudd Watts to warn clients of the dangers of penalties of up to $200,000 for individual bank employees or $600,000 for organisations.
The existence of these penalties has been repeatedly blamed for bank managers and other lenders administering the letter of the law and showing no discretion in approving loans.
Yet this literal behaviour has also got them into trouble with the Government, which accused them of an overly restrictive interpretation of the law.
Beaumont argues the changes raised as a possibility by the COFR report made sense and would improve lending rules far more than would be achieved by Clark's announcement.
“The minister’s changes will make some differences to overall lending and lending processes but will need to be done right to result in better outcomes for consumers,” Beaumont said.
“The best option presented to him would have been to target affordability regulations to riskier lending and lenders, as well as make changes to the penalties regime.
“Targeting affordability requirements to support those most at risk would provide them with appropriate protections as well as freeing up lending for those who can afford it.”