FOUR FAST FACTS ON: CCCFA EXEMPTION FOR WEATHER AFFECTED BORROWERS
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Temporary exemption
In response to the recent devastating weather events in the upper North Island, last week the government introduced a temporary exemption to regulations under the Credit Contracts and Consumer Finance Act 2003 (the CCCFA).
The intention is to make it easier to obtain emergency funding for people experiencing negative effects from flooding or other weather-related damage, by relaxing lending rules. However, the exemption is rather limited in scope, and is fairly complex to navigate.
How it works
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The exemption, set out in the Credit Contracts and Consumer Finance (Exemption for Emergency Relief) Amendment Regulations 2023, relaxes the requirement for affordability assessments for borrowers who have experienced, or who reasonably expect to experienc e, “negative effects” from the extreme weather events in January and February 2023. Importantly, while the exemption relaxes the detailed requirements that usually apply to affordability assessments, lenders will still be required to comply with other lender responsibilities (e.g. requirements to make reasonable enquiries into the suitability of a loan). That is, other aspects of section 9C of the CCCFA continue to apply in full.
Limited scope
The exemption applies to all lenders, but is limited to existing customers and:
• individuals rather than businesses;
• overdrafts or home loans:
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• of up to $10,000;
• entered into before 31 March 2023; and
• with a term of up to 12 months for revolving credit contracts, or “a period that is reasonable” in other cases.
The exemption was initially limited to the upper North Island, but has now been extended to encompass Auckland, Bay of Plenty, Gisborne, Hawkes Bay, Northland, Tararua and the Waikato in order to take account of the effects of Cyclone Gabrielle.
Commentary
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The exemption has not been met with universal approval. Concerns have mainly focused on the various limitations in the scope of the exemption, and the suitability of the products covered for the type of lending that people will ultimately be seeking.
Added to this is uncertainty for lenders in terms of what steps are required under the other provisions of section 9C of the CCCFA where the exemption applies (as with other existing exemptions under the regulations). Ultimately these factors could mean that emergency funding is still difficult and time-consuming to secure.