The government is also changing the law to lessen the liability of financial institutions which fail to provide information or which provide incorrect information – there is a class action suit in progress against ANZ Bank New Zealand as ASB for exactly those failings.
“Whilst it is totally appropriate that lenders should be accountable for poor lending practices, extending these requirements at a personal level is a step too far,” Bayly said.
“Thankfully, partly due to the decision to introduce a licencing framework, cabinet has agreed these are no longer appropriate. I expect this change will lead to less conservative lending practices.”
Bayly acknowledge the class action suits currently underway, saying the two banks' failings “in some cases these are largely of a technical nature and unlikely to have resulted in financial loss to the borrower,” he said.
“We wish to change the onus on the lender to prove the consumer was not harmed to the onus being on the consumer to show they were,” Bayly said.
"This will reduce the administrative burden on lenders, lead to more common-sense decisions, and reduce the number of incidences where lenders are punished despite a lack of harm.”
Bayly said the changes “signify a significant shift in consumer credit regulation away from the prescriptive and restricting landscape of old and towards a more proportionate, risk-based approach.”
The government also plans to streamline conduct regulation to simplify fair conduct programmes to “ensure they are fit for purpose and can be tailored to account for the nature of the business at hand,” he said.
Financial institutions Conduct of Financial Institution (CoFi) reports will need to incorporate how institutions engage appropriately with their clients and customers, how they develop new policies and products to ensure they are fit for purpose and meet regulatory requirements and the nature of adequate complaints processes.
Bayly said the Financial Markets Authority (FMA) will streamline its licencing model so that providers of multiple market services only need to hold a single licence with the changes taking place following completion of the registration of the CoFi lecence process after March 31 next year.
All existing conduct licences will be grandfathered into the new single conduct licence.
Bayly said the FMA will be given new powers to rely on assessments by the Reserve Bank to reduce duplication, such as on cyber security and the fitness of senior managers.
The FMA will also be able to review a change in control before that change happens.
It will also be able to make on-site inspections without notice as a last resort.
“To be clear, this power will only be available once all other avenues have been tried and is only intended to be used in extreme cases,” Bayly said.
The government is also looking at creating a single dispute portal for consumers. “A single 'front door' for the various services will simplify this process and improve awareness,” he said.
“The key takeaway is that this government is committed to reducing red-tape and regulatory burden to make it easier for households and businesses to access finance when they need it.”
Among other changes the government is planning is to facilitate more KiwiSaver funds being invested in unlisted assets as well as implementing all of the Commerce Commission's 14 recommendations to improve competition for personal banking services.
