UP FRONT • EDITORIAL
Thorny issue to start the year
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The Treasurer Josh Frydenberg said after the case that the principles-based responsible lending framework had become “an overly prescriptive set of obligations” that had stifled the flow of credit. “Borrowers, irrespective of their financial circumstances, have subsequently faced a longer and more intrusive approval process.” While the Australian government pledged to repeal the law, moves to achieve this have been bogged down in parliament and appear to be stalemated. The New Zealand parliamentary system is unlikely to be so difficult, but Labour will have to agree to changes as it has a majority in parliament. The law was the brainchild of former Commerce Minister Kris Faafoi, and he used to talk about how it was designed to protect vulnerable borrowers, such as his constituents. Protecting borrowers from predatory lending such as that offered by third tier lenders, payday lenders and the likes who charge unconscionable rates to consumers who, probably, don’t understand the true cost is something that should be supported. The current CCCFA changes go too far and need to be changed quickly.
t would be a foolish man to try and predict what the next 12 months has in store for mortgage advisers, but a wild guess would be that there will rarely be a dull moment. We are only at the start of the year and it's been full on with many large and public outcries over the impact of the Credit Contracts and Consumer Finance Act (CCCFA) changes which came into effect in December. The impact should be of no surprise to readers of TMM and TMMOnline as we have been warning of this for months. While the banks are firmly in the spotlight they are only doing what they have been told to do, and no doubt they are being extremely diligent and vigilant as no one wants to be the first to be pulled up for so-called “irresponsible lending”. The good news is that it appears the Minister of Commerce, David Clark, is listening. He has ordered the Council of Financial Regulators to look into the problems. If there is one silver lining to this cloud is that it will drive more people to seek advice. Interestingly, New Zealand is repeating mistakes made in Australia. Australia introduced a set of responsible lending laws which culminated in a court case where the regulator, the Australian Securities and Investments Commission (ASIC) took Westpac to court. The so-called, “wagyu and shiraz” case focused on whether or not the lender had been writing unsuitable loans. However, the court did not agree with the regulator’s interpretation of what lenders should be doing to adhere to the responsible lending laws.
Philip Macalister Publisher
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TMM 01 • 2022
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