Another tweak for CCCFA changes

The Government has had a third go at fixing the rules around the Credit Contracts and Consumer Finance Act (CCCFA).

The latest changes, announced just before the Easter weekend by the Minister of Commerce and Consumer Affairs, Dr Duncan Webb, include:

• explicitly excluding discretionary expenses from affordability testing

• providing more flexibility for lenders about how certain repayments are calculated

• extending exceptions from full income and expense assessments for refinancing of existing credit contracts

The changes mean affordability assessments are still needed for all loans.

Webb says the changes, which come into force on May 4, will improve safe access to credit for Kiwis.

“Whilst not departing from the original policy aim to ensure borrowers can repay loans without hardship, this tidies up the December 2021 changes to the CCCFA and Credit Contracts and Consumer Finance regulations,” he says.

The CCCFA changes have been a thorn in the side for borrowers since they were introduced in December 2021.

Although they were aimed at unscrupulous lenders, banks have become embroiled in the changes - to the detriment of mortgage borrowers, who have had to supply a lot more detail.

Banks can be fined if they don’t elicit the extra details.

Once the changes came in, banks virtually stopped lending as they came to grips with what was required.

Many borrowers complained that banks would not give them a mortgage because of ‘excessive spending’, such as buying Christmas presents or Lotto tickets.

The Government decided some tweaks were needed, which were applied in July last year. However, most of the existing changes in the December 2021 regulations were kept in place.

The Bankers Association said at the time the July tweaks wouldn’t make much of a difference to borrowers.

Webb says the current amendments made to the final regulations were informed by feedback from lenders, financial mentors and consumer advocates, after an MBIE exposure draft of the changes was released for consultation in September last year.