New Zealand Bankers’ Association chief executive Roger Beaumont said the delay probably would not make much difference because the “proposed tweaks” would not change much.
Tweaks to new consumer lending rules released today won’t make much difference for most people seeking credit says the New Zealand Bankers’ Association.
Changes to the Credit Contracts and Consumer Finance Act introduced last December had an immediate dampening impact on the availability of consumer credit.
“The government’s rushed attempt to fix the problem hasn’t made things easier for consumers seeking credit. Instead, it’s raised hopes of a solution that hasn’t been delivered,” says New Zealand Bankers’ Association chief executive Roger Beaumont.
“We don’t think the tweaks published today will make a big difference for most borrowers. That’s because most of the existing requirements remain in place, meaning customers will still have to provide detailed information about their spending, resulting in a more painstaking process and more loan applications being declined than before the December rule change.
“While we agree with the government’s aim to protect vulnerable consumers from unscrupulous lenders, the one-size fits all approach for all lenders and all loan types means banks don’t have the same discretion or flexibility they used to.
“We look forward to the outcome of the ongoing Council of Financial Regulators review. We believe that by working with government and organisations like FinCap, we can find a way to both protect vulnerable consumers from unscrupulous lenders and ensure a less restricted flow of credit to those who can afford it.”
NZBA’s submission on the proposed tweaks sets out why the tweaks don’t go far enough and is available here: https://www.nzba.org.nz/2022/05/02/credit-contracts-and-consumer-finance-regulations-2004-and-responsible-lending-code-exposure-draft/.
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“The drive for business is balanced with the need to identify and manage risk, including compliance with the regulatory framework in which they operate, especially AML-CFT legislation. These are commercial decisions for the banks themselves, made on a case-by-case basis,” Beaumont says.
“Banks want to keep people in their homes and there are often a range of personal solutions that banks can implement to support their customer’s individual circumstances.”
NZBA chief executive Roger Beaumont said these mortgage holders likely kept their repayments the same while interest rates fell to record lows.
Roger Beaumont, New Zealand Bankers’ Association chief executive, said about 44% of people with a home loan were ahead on their repayments “likely because as interest rates have declined over the last few years, they may have retained their repayments at the same level.”
According to the New Zealand Bankers’ Association, about 56,000 new home loans were taken out between July and December last year at an average size of $407,000.
“Depending on their loan, others may have increased their repayments further to get ahead and repay their loan more quickly. This shows good financial capability among people with home loans. It also means they’re quite well placed in an environment of rising interest rates.”
The New Zealand Bankers’ Association has released its latest half-yearly Banking Insights, covering the six months to the end of December 2021, using information collected and aggregated from NZBA’s 10 main retail member banks.