August 2, 2022
As FinCap digests the Government’s response today to the Investigation into the impacts of Credit Contracts and Consumer Finance Act 2003 changes, we continue to stress the importance of safe lending laws to support whānau as they are up against current and increasing financial pressures.
The Government is acknowledging the importance of striking the right balance between reasonable access to safe lending and maintaining a strong level of consumer protection across all consumer lending.
Following consultation with key stakeholders, any expected changes to the regulation will not be implemented until March 2023.
FinCap CE Ruth Smithers says:
“We are pleased to see that these changes are not being rushed through without proper consideration of potential impact for harm.
We support this approach as we must. Over many years financial mentors have seen endless examples of collection on loans that were always going to be unaffordable. This causes very avoidable but very significant harm in our communities.
Lenders need to be required to check properly that they are not setting up a whānau to go without food to meet the costs of a loan and additional default penalties.
The debt spiral that results when such situations arise can have intergenerational impacts when whānau end up facing serious stress, losing their most valuable belongings or going without kai because a lender is collecting on a loan that was always going to be unaffordable.
It often takes unreasonable efforts from a whānau and their financial mentor to get anything close to resembling timely and fair redress for the mess caused by irresponsible lending.
The wider reform is already making a positive difference on the ground. Community services have reported fewer issues with high-cost lending for whānau. We expect to see more whānau on the path to financial wellbeing over the next year due to these recent parts of the reform.
We also warmly welcome the acknowledgement by Minister Clark of financial mentors and their role in reporting irresponsible lending, as well as the important work that MoneyTalks continues to undertake, especially with the noted increase in referrals to the helpline.”