Small CCCFA relief to relief to storm victims

The Government has moved to ease the impact of the Credit Contracts and Consumer Finance Act (CCCFA) on storm damaged properties.

It has decided to provide an exemption from certain requirements of the CCCFA where an existing customer of a lender has suffered storm damage this month or last.

The exemption applies to credit offered to pay for remediation, up to a $10,000 limit and for a temporary period of up to 12 months.

Under the change, the lender will not need to comply with parts of Section 9 of the Act regarding overdrafts and home loans.

They relate to a lender making reasonable inquiries about whether it is likely that the borrower will make the payments under an agreement without suffering substantial hardship and whether a guarantor will be able to comply with a guarantee without suffering substantial hardship.

The exemption is subject to several conditions such as the lender being willing to provide hardship assistance to the borrower after the credit is provided if the borrower requests assistance.

This could include the lender refinancing the credit contract on affordable terms, granting interest relief, or reducing the debt owing.

This decision by the Government has not met with universal approval. The Financial Services Federation (FSF) is pleased the Government has acted swiftly to help suffering but says the plan has flaws.

“During consultation we made clear that home loans and overdrafts were not the most suitable products for the type of lending that people will need to help themselves get back on their feet following such a disaster,” said the FSF executive director Lyn McMorran.

“For many people, a vehicle or household item is their biggest asset. It is simply logical that products offered by non-bank lenders specialising in lending against household items and motor vehicles would be of greater use to people in these situations.”

McMorran said only people in the fortunate position of owning a home could be helped by the mortgage relief.

Furthermore, an overdraft was likely to be unsecured lending and therefore the cost of credit would be greater than that of a personal loan secured over the goods being purchased.

“The FSF will continue to voice its concerns with officials and hopes a more sensible outcome that ensures people who need assistance can get it will ensue,” McMorran said.

The Government made its change without fanfare at 5pm on Monday.

In contrast with the criticism by the non-bank lenders, the major banks support this initiative.

The New Zealand Banking Association said banks wanted to provide as much support as possible to people affected by the recent storms.

“The temporary exemption to some of the affordability requirements in the Credit Contracts and Consumer Finance Act will assist banks to speed up the finance application process for those who need it,” said its chief executive Roger Beaumont.

“Banks will be able to use the exemption and make decisions depending on the customer’s circumstances.”

Beaumont said speeding up the lending process would help customers in need.

“We appreciate the government’s pragmatic approach to this exemption.”

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