The Financial Services Federation (FSF) has welcomed proposals to tighten up consumer lending laws as part of the Credit Contracts and Consumer Finance Act (CCCFA) review. This follows MBIE’s release of a discussion paper on consumer credit regulation, which outlined the key findings of the review and suggested a number of responses.
According to MBIE and Commerce and Consumer Affairs Minister Kris Faafoi, possible customer protection measures identified in the paper include a cap on interest rates and fees, increased licensing and registration for lenders, strengthening enforcement and penalties for irresponsible lending and introducing stricter requirements for advertising and affordability assessments.
Faafoi stated that the findings confirm what he has heard from budget services and vulnerable customers across New Zealand, and says the 2015 amendments to the Act clearly didn’t go far enough and that it’s time to “finish the job.”
FSF chief executive Lyn McMorran has welcomed the discussion paper, saying it is important that customers should be able to access credit via a responsible lender.
“FSF and out members support the Minister in his efforts to stamp out irresponsible lending and prevent New Zealanders from finding themselves in situations of unmanageable debt, but legislation will only go so far in helping to do this,” said McMorran, who also sits on MBIE’s Responsible Lending Code Committee.
“What we need to do is put predatory lenders who don’t adhere to the law out of business, and that is only going to happen with enforcement. It has been good to see the Commerce Commission’s recent action in that space and we hope that continues.”
FSF says a conversation around interest rate caps would be highly appropriate, and the non-profit will be discussing all the proposed options brought forward in the review.
“When you hear a story of people outrageously being charged 800% interest per annum in a payday loan, there is certainly a case for an interest rate cap, but at this stage it is a question of what that might look like and considering options,” said McMorran.
“Once we have been able to thoroughly consider the points in the discussion paper, we will be able to comment more specifically and further detail will be in our submission.”
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