Single set of expectations from new CCCFA regulator

It is now the single conduct regulator for financial markets in New Zealand, avoiding duplication between regulators and compliance costs.

For the mortgage market it couldn’t come soon enough. Lenders already certified by the Commerce Commission, or exempt from certification, are automatically deemed to hold an FMA licence, with no application or fee required.

They also no longer need to submit an annual return as this has been repealed. While the FMA might require one in the future it will consult with the industry beforehand.

The FMA says its approach to the CCCFA is proactive, risk‑based, and focused on fair conduct. Supervision tools include roundtables, guidance, webinars, thematic reviews, and on‑site/desk‑based monitoring.

Responses range from feedback letters, use of regulatory tools and, for serious misconduct, investigations and litigation.

Its regulatory responses include warnings, direction orders, stop orders, action plans, licence conditions, and in serious cases licence suspension or cancellation.

Litigation options include enforceable undertakings, civil proceedings, and criminal proceedings for intentional or reckless breaches.

FMA executive director licensing and conduct supervision Clare Bolingford says in practice the shift is seamless for existing lenders and gives them a single, more consistent set of expectations. 

She says aligning credit regulation with broader financial services creates a framework that better supports responsible lending and consumer protection.

“Consumer credit plays an important role in helping New Zealanders manage their finances and access funds when needed, from funding major purchases through to meeting everyday living costs.

“Our goal is to protect New Zealanders and ensure fair treatment across financial services. We’ll be focusing our efforts on the areas where we see the greatest potential for harm.”

The FMA will initially focus on lending practices, particularly suitability and affordability assessments, commission-based structures and how conflicts of interest are managed and complaints handling processes.

Bolingford says the FMA is looking forward to working constructively with the sector.

Threats to sector

Squirrel Mortgages chief executive David Cunningham says while there could be some concerns around the mainly commission-based mortgage industry, most advisory firms and individual mortgage advisers are using aggregators’ software and processes for their FAP licenses.

Squirrel pays it advisers a salary and commission on top once targets have been met,

“Most of the compliance is built into the services that mortgage aggregators like NZFSG or KAN offer. They provide the backbone so advisory firms and individuals don’t have to do their own and can structure their business and operations in a way that is best for clients.”

Cunningham says compliance has also been made easier through the use of AI tools. His observation is that exceptionally good checks and balances can be built into a business through AI.

Squirrel has found the FMA good in terms of how it has approached thematic reviews of the type that is being proposed for the next year. “It is respectful and doesn’t want to destroy an industry by doing something dumb.”

Although there have been murmurings of clients paying fees to advisers for arranging their mortgages instead of banks paying commission to advisers to avoid any conflicts of interest, he says it would be a disaster.

“That would never work. You'd see the advisory industry destroyed if that was the mandated model.

“What's the logic for the customer paying advisers? They're getting advice. What's the logic for banks paying commission? They avoid paying a workforce. Under the existing system banks have an outsourced workforce of experts, whereas internally they struggle to get people that will stick at it.

Banks have effectively paid to outsource their mortgage business and only pay advisers when they deliver a result.”

He says while an argument can be made for clients paying advisers a fee, it is well known that people hate paying fees for anything but love receiving cashbacks when they move their mortgage to a different bank. It is the main form of competition among New Zealand banks, who don’t compete fiercely on interest rates.

“We’ve got an industry where the clients just only don't pay advisers, the bank does, but the customer also gets a nice big cashback from the bank.

So asking a client to not receive a big cashback and pay for mortgage advice will not only destroy the industry, but also dramatically lessen competition, resulting New Zealanders being worse off.