KEY POINTS:
Big increases in banks' write-offs for bad loans and escalating household debt demonstrate the need for a review of consumer credit regulation, bank workers' union Finsec says.
The union will today launch a campaign calling for new legislation to strengthen consumer protection in the financial services industry.
Some facets of sector regulation are handled by government agencies such as the Commerce and Retirement Commissions, and others by industry bodies such as the Bankers Association, which has a voluntary code of practice.
Finsec will propose new legislation to establish an independent Financial Consumer Agency (FCA), either as a new government agency or part of an existing agency such as the Commerce Commission, to be co-funded by the Government and industry.
The agency's role would include protection and advisory for the consumers of financial services and the development, oversight and enforcement of a Code of Lending Practice and a Code of Social Responsibility for the industry.
Finsec campaigns director Andrew Campbell said the proposal was for a centralised approach to consumer lending regulation.
"What we're proposing is a much more simple model, a standardised code that applies to all aspects of the lending sector and goes beyond what is there at the moment.
"What we're looking at, and where other countries are moving, is better information and disclosure in relation to terms and conditions. We think there needs to be stronger emphasis on independent advice, particularly in relation to major lending and better evaluation of customers' ability to service debt."
Finsec has long criticised performance target systems employed by some local banks which encourage staff to sell credit products to customers who in many cases, the union says, can ill afford them.
Campbell said the trebling of bad debt provisions revealed by New Zealand's biggest bank, ANZ National, was the downside of the banks' undue focus on growth in recent years.
However, Finsec's proposal was not aimed particularly at the banks, who already had their code of practice. Campbell said there was a need for better consumer protection across the sector, particularly for third tier lenders.
FAIR GO
Bank workers' union Finsec is calling for new "Fair Lending" legislation to protect borrowers.
* It is proposing an independent Financial Consumer Agency with responsibility for protecting and informing consumers of financial services.
* Finsec wants a standardised code of lending practice across the industry from banks down to "third tier" lenders.
* It says borrowers would benefit from a better disclosure regime and easier access to independent advice, particularly about major loans.
