Eased Loan Rules Aim to Reduce Stress and Increase Access to Credit
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- Eleven pages of loan affordability rules removed from the CCCFA from 31st July.
- New guidelines give lenders more flexibility to assess loan affordability.
- Changes aim to balance consumer protection with easier access to finance.
Strict loan affordability requirements and detailed checks are being relaxed, as announced by Commerce and Consumer Affairs Minister Andrew Bayly and Housing Minister Chris Bishop. Starting from today, 31st July, eleven pages of stringent affordability regulations will no longer apply under the Credit Contracts and Consumer Finance Act (CCCFA). This change aims to make it easier for New Zealanders to access finance confidently and with less hassle.
Mr Bayly stated, “The affordability regulations imposed very specific criteria that customers needed to meet before taking out a loan, creating a confusing and stressful experience.” He added that these rules not only made the process frustrating for customers but also increased compliance costs for lenders. This situation particularly affected the availability of small loans under $5,000.
Reflecting on the impact of these regulations, Mr Bishop noted, “Many Kiwis applying for home loans will remember the stress caused by the extensive information and disclosures required.” He criticised the regulations for treating consumers like children, citing the requirement for lenders to verify personal expenses against national statistics, which included trivial expenditures like occasional coffees or family treats.
The removal of these prescriptive rules is part of the National-ACT coalition’s commitment to reforming the CCCFA to protect vulnerable consumers without unduly restricting access to credit. Instead, an updated Responsible Lending Code now provides guidance for lenders to make reasonable inquiries into a borrower’s ability to repay.
Mr Bayly emphasised, “The updated Code allows lenders to assess affordability on a case-by-case basis, taking into account individual circumstances.” He assured that lenders are still required to properly assess affordability and face penalties for failing to do so, as outlined in the CCCFA.
The Ministers highlighted that consultation with lenders and budgeting services supported these changes, with many lenders welcoming the new approach after experiencing negative outcomes from the previous requirements. “It’s in no one’s best interest to lend money to people who can’t afford to pay it back,” Mr Bayly concluded. Mr Bishop added, “Today is about restoring flexibility and freedom for hardworking Kiwis who just want the government to step aside so they can move forward with their lives.”