Will repealing the CCCFA be enough?
Borrowers appear to be coping as mortgages roll off lower to higher interest rates. Centrix August data show the number of home loans in arrears fell for the third consecutive month to 1.25%, down from 1.26% in July.
Monday, October 9th 2023, 9:36AM 
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by Sally Lindsay
There are now 18,600 mortgages on which payments are past due. That is 28% more than August last year.
Buy now, pay later (BNPL) arrears was 9.4% – the lowest since February. Last October, Cabinet agreed to bring the BNPL industry within the Credit Contracts and Consumer Finance Act (CCCFA).
Following consultation, Commerce Minister Duncan Webb said BNPL exempted loans from affordability and suitability assessments under the CCCFA as “that would be too onerous for these short-term, low-value, interest-free loans”. Instead, he said, BNPL lenders must complete comprehensive credit reporting when customers sign up or request a higher credit limit. Detailed regulations will be announced soon, while BNPL lenders have a grace period to implement changes.
Hastie Mortgages owner Campbell Hastie told the Auckland District Law Society’s Law News this as a bad move.
While he understands the rationale, given small loans are less likely to lead to trouble, “when you’ve got people who have five different buy now, pay later accounts, you’re really upping the ante. That’s pouring petrol on a little fire,” he says. “To have that kind of facility exempted from the CCCFA, it’s a bit of a slap in the face in a way.”
However, Loan Market mortgage broker Bruce Patten told Law News that lending, particularly for mortgages, had gotten easier through applied common-sense. Nevertheless, affordability remained up for interpretation.
Other mortgage brokers say more clients want advice on switching to interest-only home loans or to another provider for lower interest rates. For many this means a new application to ensure they can still afford their lending.
“Some banks are still digging into the depths of a person’s expenditure, whereas others are relying predominantly on what the customers are saying their future expenses will be,” Patten says. “I still feel it’s gone way over the top and we really don’t need to be in this space. We didn’t have an issue before; we now have an issue because of the way it’s been written.”
Patten is urging National to follow its promise to repeal it and look at the original intention.
National commerce spokesman Andrew Bayley says repealing the 2020 and subsequent amendment regulations is a priority. From there, he would create a new set of regulations so high-cost lenders – the 2019 reforms’ intended target – don’t prey on vulnerable New Zealanders. He says it may not be enough because some of the tightened lending behaviour over the past three years is now ingrained into banks’ processes.
Financial Advice New Zealand (FANZ) chief executive Katrina Shanks says under the Act directors and senior managers of creditors must exercise due diligence so the business complies with its duties and obligations – or face personal liability.
Consequences may include a penalty of up to $200,000 and/or court-ordered damages. Directors and senior managers cannot be indemnified if ordered to pay a pecuniary penalty. Shanks says easier credit won’t return to pre-2021 levels until the liability provisions have been relaxed – something a new government can do, she says.
Recent easing
Hastie believes recent easing in lending is partly because lenders are now interpreting the amended CCCFA in a way that “allows business to be done”. He welcomes increased robustness introduced by the Act for affordability assessments as applicants are more informed about how spending habits affects ability to service a mortgage, but “the end result is no different to what we’ve been getting for years. So, more work for the same result – but it’s a better result in a sense because of that work.”
Go Mortgages broker Tony Ridley says the CCCFA has faded into the background while other market factors exert more pressure on the accessibility of mortgages.
He says now when doing a mortgage application as long as everything relevant and material is covered off, the banks are not likely to come back to you as they did before.
The Reserve Bank’s most recent credit conditions survey, which sought banks’ views on credit availability and demand, found demand for residential mortgages had declined in the six months to March 2023.
Banks noted a series of major headwinds impeding household demand, including higher mortgage rates, cost of living and building costs. The banks also expected mortgage demand to remain subdued in the six months to September 2023.
While household credit availability had stabilised after incremental falls during the past two years, some tightening in prices remained. Of the factors affecting credit availability for the next half-year, “regulatory change” was largely equal to balance sheet constraints, compared with March 2022 when pressure from competition and perception and appetite for risk were the biggest factors.
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Minister of Commerce Duncan Webb was quoted earlier in the year blaming the industry for not engaging with the Government and MBIE regarding the disastrous CCCFA changes. More recently we learnt that MBIE was in fact at fault overzealously rewriting the regulation and ignoring numerous warnings from the industry about the impact of the changes on credit worthy borrowers. Mr Webb’s predecessor was foolish enough to listen to MBIE’s advice, but he also chose to ignore the industry himself.
The Ministry should not have any say now over what new regulations are appropriate. Many credit worthy borrowers were financially disadvantaged by the CCCFA changes when they were first introduced in late 2021 and the blame for that lies squarely with MBIE officials.