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).
Thursday, August 17th 2023, 11:35AM 
3 Comments
by Sally Lindsay
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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Great news to hear that a new Government would also repeal CoFi. Both the RBNZ and FMA previously said in a select committee that this Act was not needed for the protection of NZ consumers.
Let us all hope now that MBIE's potential involvement in any rewriting of the CCCFA will be minimal at best. We all remember those enlightened MBIE officials who required the $500 per week that a first home buyer couple were currently saving towards a house deposit to be treated as an ongoing expense even though this money would instead go towards servicing a home loan. Even the former Minister of Commerce David Clark remarked at the time that including a customer’s savings toward a house deposit as an expense “didn’t seem quite right to him.” (sigh)
The CCCFA changes when they were first introduced in late 2021 must rank surely as one of the worst pieces of legislation ever introduced in New Zealand’s history. Yes, some of the issues with the Act had to do with this current Government’s ideology towards the financial services industry but a lot was due to the arrogance of MBIE officials who thought they alone knew best. The many warnings made by the industry about the changes were completely ignored. We simply cannot go through the same exercise again!
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However, I do hope the pressure is maintained on BNPL, hire-purchase and vehicle finance providers. They are the real issue. Most banks already had good lending practices, but there was never anything stopping a borrower to go out and load up on consumer finance debt.
And the conflict of interest that retail salespeople still have should be investigated. When they are rewarded for selling goods on finance, there is bound to be trouble!