The Government is reforming financial services to improve access to home loans and other lending, and strengthen customer protections, Commerce and Consumer Affairs Minister Andrew Bayly and Housing Minister Chris Bishop announced today.
“Our coalition Government is committed to rebuilding the economy and making life simpler by cutting red tape. We are revoking 11 pages of overly prescriptive affordability regulations, introduced by the last government, to enable Kiwis to access finance with confidence,” Mr Bayly says.
“These regulations created unnecessary compliance costs and are an excessive barrier for lending. And worse, the regulations failed to protect the most vulnerable Kiwis – the very people they were intended to safeguard.
“When the affordability regulations were introduced into the Credit Contracts and Consumer Finance Act 2003 (CCCFA) in December 2021 it threw a bucket of cold ice over banks and financial providers by prescribing minimum steps to assess the affordability of a loan. The overly arduous checks meant the time it took to process loans dramatically increased. Lenders told me that a small loan that used to take two hours to process suddenly took up to eight hours.
“This meant it was no longer affordable for many providers to offer small loans. It became very difficult for everyday Kiwis, who need $500 to fix their broken-down car, to access a safe line of credit. They were effectively frozen out of the market and many vulnerable Kiwis were instead forced to borrow from high-interest loan sharks,” Mr Bayly says.
Housing Minister Chris Bishop says the time it took to process a home loan increased substantially and thousands of Kiwi families, who would have previously qualified, were locked out of the market.
“The changes announced today will make the home loan application process simpler for hardworking Kiwis who have diligently saved to buy a house. . .
Labour’s tightening of the regulations was a government-knows-best approach that increased the time and complexity involved in getting loans for even small amounts of money.
It was unnecessarily intrusive. It led to lenders trawling through would-be borrowers’ bank accounts and turning down loans because of the amount spent on coffee.
People need protection from unscrupulous lenders but the government doesn’t know better than the responsible lenders who don’t need overly prescriptive regulations to judge whether a loan will be prudent.
Ele Ludemann is a North Otago farmer and journalist, who blogs HERE - where this article was sourced.
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