CCCFA lending rules to be reviewed - again

'Wider review' of CCCFA to get underway, says Commerce and Consumer Affairs Minister Duncan Webb, accompanied by Finance Minister Grant Robertson. Photo / Mark Mitchell

The controversial Credit Contracts and Consumer Finance Act (CCCFA) is due to be reviewed – again.

Commerce and Consumer Affairs Minister Duncan Webb said the Government would “run the ruler” over the entire Act, which is aimed at protecting vulnerable consumers from predatory lending practices.

Speaking to the Herald, Webb said he wanted to recalibrate the rules. He wouldn’t go so far as to say he wanted them watered down.

The CCCFA has been criticised – often by those with vested interests – for being too heavy-handed; stymying the flow of credit to those who can afford it in a bid to protect a minority who can’t.

The rules were relaxed in both May this year and July last year to address the “unintended impacts” of changes that took effect in December 2021.

Now Webb wants to do a “wider review” of the Act, saying he will publish a terms of reference “in due course”.

“It is important to keep the Act up to date to ensure it continues to strike the right balance between protecting vulnerable consumers and having a healthy and effective market for credit,” Webb said.

“It may well be that the rules need to be a little more tailored; a little more nuanced, because there are different products in the market that might need different sized interventions.”

Webb said the fact he wanted yet another review, following prior reviews led by his predecessors, was “not at all an admission of failure”.

One of these recent changes made means lenders don’t need to scrutinise prospective borrowers’ discretionary spending as much as they did before. They can assume the borrower will cut some of this spending if they must, to meet their repayment obligations.

“The tweaks that were made to the affordability framework were the right tweaks to make,” Webb said.

“But I’m not going to sit here and wait for something else to go wrong. I’m going to say, let’s keep this continually fit for purpose in a rapidly moving financial environment.”

Specifically, Webb said the Government would create a permanent exemption from certain CCCFA obligations for people affected by emergency events.

This would remove the need for the Government to make ad-hoc carve-outs in the rules, as it did after Cyclone Gabrielle and flooding in parts of the North Island earlier in the year, to enable those affected by disasters to borrow limited sums without having to pass the usual affordability tests.

Webb also said, “We will be extending an exemption for voluntary targeted-rate scheme loans [these low-cost loans are usually for sustainable home improvements like insulation] administered by local and regional councils.

“This will carve them out from the CCCFA and avoid unnecessary compliance costs. I expect regulations to give effect to this exemption to be made by the end of the year.”

Webb concluded, “I want to make sure that the regulation that we do have encourages competition and doesn’t create unnecessary barriers for new entrants or people who want to try to do something a little bit differently.”

Jenée Tibshraeny is the Herald’s Wellington Business Editor, based in the parliamentary press gallery. She specialises in government and Reserve Bank policymaking, economics and banking.