FinCap welcomes the government’s continued commitment to loan security. Laws requiring all lenders to have robust processes to sell only appropriate and affordable loans will continue to prevent harm in our communities.
This morning, Minister Clark announced practical updates that target lenders by further clarifying the checks they must do before selling a loan.
Previous government reforms to credit agreements and the Consumer Finance Act (CCCFA) are already creating a more level playing field for whānau.
Financial mentors report that the most blatantly unfair lending practices are disappearing as troubled borrowers have more options. This means more well-being for our whānau and our communities.
In a letter to FinCap MPs and others earlier this week, we highlighted the introduction in 2021 of clear requirements for what lenders must include in an affordability assessment as a game changer.
These checks mean that all borrowers can expect lenders not to look to put them on the path to financial disaster with unaffordable interest and fees or unsuitable arrangements.
North Harbor Budgeting Service financial mentor David Verry said CCCFA reform has so far meant mobile or payday lenders – like truck shops – have all but disappeared from the landscape.
“The number of people we had before – I had clients who had five or six payday loans – I don’t see payday loans now, or anything like a payday loan,” he said.
Debtfix director and co-founder Christine Liggins says the reform means fewer people are being sold a loan they cannot afford.
“A real, honest affordability assessment will easily stop a spiral of debt because it takes into account all the costs – all the things people don’t think about.”
FinCap Senior Policy Advisor Jake Lilley said they will continue to support changes that protect all whānau from financial hardship.
“Too often financial mentors see lenders collect loans that were never going to work and immediately put a whānau on a difficult journey where it was hard to buy kai.
“Safe lending laws with affordability assessment financial health checks mean lenders cannot overlook the damage they could or have caused,” he says.
“As the Commerce Commission recently revealed, predatory flex-fee practices that are banned overseas are commonplace in the auto loan industry. It’s important that borrowers have safe lending laws that allow them to support.”
FinCap will continue to participate in the Council of Financial Regulators’ investigation into the implementation of CCCFA reforms to share the benefits of safe lending laws, as well as instances where some lenders are still avoiding liability for unfair conduct.
The financial capacity building sector shared their thoughts on what the CCCFA reform package means so far for the whānau they support in this video: https://www.youtube.com/watch?v=aqNDg4_O8H4 .
Remarks
- FinCap is the umbrella organization for Aotearoa’s 900+ financial mentors
- The package of reforms planned by the CCCFA over the past few years includes interest rate caps for high-cost loans, certifications for mobile lenders (or truck shops), and sanctions for senior executives and directors who do not comply with the changes.
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