National plans to stop banks’ intrusive questions to borrowers

A National-led government will make significant changes to the Credit Contracts and Consumer Finance Act (CCCFA).

The party’s Commerce and Consumer Affairs spokesman Andrew Bayly says it will stop banks asking intrusive questions about borrowers’ spending habits when they apply for a loan.

Under the law banks have to go further than ever before to check that they are lending responsibly and can't rely on the information given.

National will narrow the scope of the CCCCFA, which was supposed to stop predatory payday lenders granting loans to those who can’t afford them.

“Instead the CCCFA has stifled access to credit and resulted in borrowers being subjected to highly intrusive questioning from their bank, with every purchase, membership, or subscription up for scrutiny," Bayly says.

Changes to the CCCFA in 2021 required banks to break down applicants' spending habits before approving loans going as far as requesting explanations for deviations as little as $5.

At the time the changes were made the Financial Services Federation, Financial Advice NZ, banks, Bankers’ Association and others told the Government that the rules would be too restrictive, most consumers did not want them, the majority were not in vulnerable circumstances, and they just wanted access to credit without having to answer a lot of intrusive questions to get it.

But that’s what happened, Lyn McMorran, Financial Services Federation (FSF) chief executive says. “It has restricted access to credit and made it an unpleasant process for most borrowers.” 

Banks inquired into borrowers’ social lives, hobbies and, for example, how much they spent on parking. Until recent tweaks to the Act, borrowers found every single transaction being analysed and questioned.

Bayly says someone looking to start a business by extending their mortgage shouldn’t have to tell their bank which brand of cat food they buy or justify their Netflix subscription.

He says National will maintain tight restrictions on predatory lenders but "significantly reduce" the scope of changes made by Labour to the CCCFA, which has "proven unworkable".

"National will also repeal the recent Conduct of Financial Institutions Act, which was meant to manage financial misconduct, but will impose additional burdens on lenders, making credit more expensive and harder to obtain, even for basic services such as overdrafts and mortgages," Bayly says.

Labour, in the meantime, has said it will review the Act, although it has not given a date for that. This will be the third time the Government has undertaken a review.

McMorran says the FSF does not want a repeat of the 2021 changes to the legislation or the regulations. “The sector is fairly fatigued from having just gone through two other reviews.”

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