MPs must support safer lending laws to protect vulnerable people
March 9, 2022
We have sent a joint letter, in partnership with other financial and social services, urging parliamentary parties across the spectrum to support the 2021 reform of the CCCFA changes.
The new Credit Contracts and Consumer Finance Act (CCCFA) changes and regulations deliver crucial safeguards that help protect whānau across Aotearoa from the irresponsible lending and unmanageable debt that have been a significant problem for the past twenty years.
Good Shepherd NZ’s Chief Executive, Fleur Howard, said:
“New Zealand has a debt problem. There are too many Kiwis with unmanageable debt because of easy access to fast credit and not enough protection against irresponsible lending – we need to break this harmful debt spiral.”
The joint letter reveals that the wider reform is already making a positive difference on the ground, that community services are reporting fewer issues with high-cost lending and that truck shops have stopped causing issues in various towns.
Citizens Advice Bureau’s Deputy Chief Executive, Dr Andrew Hubbard, supports the reforms. He said:
“The 2021 reforms to credit law, which ensure affordable and responsible lending, are critical to the wellbeing of our communities.”
The new regulations standardise the process lenders need to go through to ensure a loan is affordable, and part of that affordability assessment requires them to gather evidence and record it. This has already made it much easier for Good Shepherd NZ’s Financial Wellbeing Coaches, as well as financial mentors and others supporting people with unmanageable debts to challenge irresponsible lending.
It has also forced lenders to look more closely at their lending practices to make sure they are acting responsibly.
Christians Against Poverty (CAP) spoke about a recent case regarding a young couple with three children – in which a lender had to wipe over $10,000 of interest charges and fees from a $29,000 loan after CAP discovered the lender hadn’t assessed the couple’s affordability appropriately.
In a separate case, another had to lender wipe off nearly $20,000 of interest charges and fees from a $32,000 loan for a client that earned less than the living wage – again after CAP discovered the lender hadn’t conducted a proper affordability assessment.
CAP’s Senior Policy Advisor, Michael Ward, said:
“Every day we continue to be called by people drowning in debt when they should never have been granted loans in the first place; that is when lenders have failed to conduct proper affordability assessments.
“Changes to the CCCFA that ensure lenders carry out proper affordability assessments have been hard-won and the benefits of the reforms are overwhelmingly positive for those vulnerable to financial hardship.
“As a result of the changes to the CCCFA, we’re anticipating fewer clients experiencing financial hardship, fewer clients going through insolvency procedures, and fewer unreasonable fees and advertising targeted at vulnerable consumers. We’re quite happy about that.
“We therefore urge the government, in its review, to continue to require lenders to adhere to thorough affordability assessments.”
Ngā Tāngata Microfinance’s Chief Executive Officer, Natalie Vincent, said she’s seen a significant change since the interest rate caps were introduced in June 2020 and believes the latest reforms to bring about similar change to financial wellbeing.
“Safer lending laws and rigorous affordable assessments are critical in preventing irresponsible practices by lenders. The reforms have been put in place to protect borrowers from harm and we expect to see the positive impact coming through over the next year,” she said.
Our joint letter underlines that no one in Aotearoa should be losing their most valuable belongings or going without food because a lender is collecting a loan that is unaffordable.
The joint letter was sent to all parliamentary parties, Tuesday 8 March, by ActionStation, Christians Against Poverty, Citizens Advice Bureau, Debtfix, FinCap, Good Shepherd NZ, Muaūpoko Tribal Authority, New Zealand Council of Trade Unions – Te Kauae Kaimahi, Ngā Tāngata Microfinance and The Salvation Army.