New commerce minister blames industry for CCCFA

The new minister of Commerce and Consumer Affairs thinks the finance industry must share responsibility for problems with the Credit Contracts and Consumer Finance Act (CCCFA).


He says the finance sector did not engage sufficiently with the government to make sure the law would work well.

The CCCFA has been widely accused of smothering the lending industry in red tape, and a process of reforming it began within two months of it being passed.

A first tranche of reforms reduced the need for detailed analysis of spending patterns such as consumption of cups of coffee. A second tranche is due out soon.

The minister who pushed this through, David Clark, has been removed from cabinet. His replacement is a former law professor and second term MP Duncan Webb.

Webb defended the CCCFA, even if it had its faults.

“It was a first cut, it wasn't perfect....but the philosophy is absolutely right, that lenders don't just provide good information, but they act fairly and appropriately, and take into account the interests of borrowers,” Webb said.

It was then put to him that any law that needed to be reformed within a matter of months must have been a dog in the first place.

“What it indicates is that the finance sector wasn't prepared to move with the times,” he replied.

“It's a pity that we didn't have great engagement in that regard, because we would have come out with a better and more workable system.

“We wouldn't be revising it if we had a finance sector that was more prepared to follow international best practice.”

Questioned further about this, Webb said he wasn't “laying blame” and he accepted that the first part of the law “didn't work.

“It's the government's job to get it right.....but I am very open to free and open discussions about achieving the policy which includes making sure that borrowers are protected from poor lending practices.”

Financial Service Federation chief executive Lyn McMorran said her members strongly agreed with the need to protect vulnerable borrowers.
And she was grateful that Webb had accepted a request for a meeting with her sector.

But it was wrong to say that the sector had not engaged with the government earlier.

“When it comes to engagement, we engaged all the way through, with officials and with the minister himself whenever we could get to see him.

“We always came with the view that vulnerable borrowers needed protection....but what was required was not a law with more prescriptive regulations but enforcement of the law that already existed.

“All of the things that we said would happen (such as blocked credit for solvent people) were not unintended consequences, they were spelled out by the industry right from the start.

“We were engaging but no-one was listening.”

The New Zealand Banking Association also insisted it had been closely involved in the establishment of the CCCFA rules.

“The banking industry has engaged with the current CCCFA reforms every step of the way,” chief executive Roger Beaumont said.

“(This included) submissions to the government and parliament since 2018, and it regularly engaged with MBIE officials and ministers during that time.

“The banking industry specifically warned the government and regulators about the unintended consequences of the regulations.”

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