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Commerce Minister David Clark has hinted banks may not have been complying with responsible lending rules, as he outlined the terms for an inquiry into legislative changes that have been blamed for loans being refused.
On Monday afternoon Clark released terms of reference for its investigation into the Credit Contracts and Consumer Finance Act (CCCFA).
While New Zealand's banking sector has said the new rules mean certain customers who were previously able to borrow are now having to have applications declined due to the new rules, Clark has fired back, suggesting a drop in lending may be seasonal and it was possible banks were simply not ready for the changes.
Clark told Newstalk ZB host Mike Hosking that similar changes in Australia took time to bed in.
"Some banks were better prepared than others and I think that's what we're seeing here."
Asked if he believed an investigation would show he had "cocked up" Clark seemed to believe this was not the case.
"My hunch is what we're seeing is the result of the changes making an impact in the right way," Clark said, adding that the review would establish the facts.
A review of lending in 2018 found "widespread irresponsible lending in New Zealand and that included across the banks," Clark said.
Initially targeting loan sharks, banks warned the changes would make lending more conservative. Almost as soon as the legislation came into force, bank customers complained they were being rejected loans due to what appeared to be minor personal spending.
The terms of reference suggest the investigation will start reporting back to the Commerce and Consumer Affairs Minister within days, but a swift fix is unlikely.
Headed by unnamed officials at the Ministry of Business, Innovation and Employment, the first advice will be provided by "early-mid February" with further advice expected in April.
Outlining a series of potential work streams, including changes in credit markets, other factors that may be impacting lending such as Reserve Bank lending rules and assessing the CCCFA's impact, the terms of reference suggested more work may need to follow.
"A potential outcome is that more work will likely need to be done to fully understand actual impacts."
Clark, who has come under fire as reports documented the extent to which banks warned about the possible impact of the new rules, appeared to hit back on Monday.
The Dunedin North MP revealed he had called the heads of the major banks in for meetings this week "to the bottom of exactly what aspects of the CCCFA responsible lending rules were not being adhered to by some banks previously.
"Anecdotal evidence to date suggests the new lending requirements have presented a greater challenge for some parties."
Clark did not elaborate on the statement and has refused interview requests.
In a statement, the New Zealand Bankers' Association said it did not know what Clark was referring to.
"Banks take their obligations to comply with the law very seriously. That was the case before the rule change, and remains the case," NZBA chief executive Roger Beaumont said.
"The suggestion that banks were not complying with their responsible lending obligations before the latest CCCFA changes comes as a surprise. Banks are simply complying with the new rules as they are written.
"There's a one-size fits all approach for all lenders and all loan types, from home loans to overdrafts and extensions to credit card limits. This means banks don't have the same discretion or flexibility they used to."
As he launched terms of reference for a probe into new lending rules, Commerce Minister David Clark (centre) claimed banks had not been meeting responsible lending rules. Photo / Mark Mitchell.
Supported by the Treasury, Reserve Bank and Commerce Commission, the terms of reference say MBIE will lead an investigation into "the intended or unintended impacts, beyond those expected by the initial implementation" of the legislation "primarily in relation to mortgage, but also other lending, by banks and non-bank lenders in the current consumer credit market".
Introduced into Parliament by Kris Faafoi, Clark inherited the legislation when he became Commerce Minister after the 2020 election.
Although he delayed the implementation of the legislation in late 2021 to give the banks more time to prepare to implement it, Clark did not accede to calls for it to be scrapped.
Within weeks of the legislation coming into effect on December 1, customers began claiming approval for loans due to the rules.
Established customers at banks have claimed they were placed under unusual amounts of scrutiny despite lengthy credit histories.
"The investigation will analyse the reported outcomes of the CCCFA and whether they're attributable to the Act's intended protections, unintended consequences or any other external factors – like the global economic situation," Clark said.
