FinCap welcomes the Government’s ongoing commitment to safe lending. Laws requiring all lenders to have robust processes to only sell suitable and affordable loans will continue to prevent harm in our communities.
This morning Minister Clark announced some practical updates that focus lenders by further clarifying what checks they must do before selling a loan.
The Government’s previous Credit Contract and Consumer Finance Act (CCCFA) reforms are already bringing about a fairer playing field for whānau.
Financial mentors report the most blatantly unfair lending practices are fading away while borrowers in a tough spot have more options. This means more wellbeing for our whānau and communities.
In a letter to MPs from FinCap and others earlier this week we highlighted the 2021 introduction of clear requirements as to what lenders must include in an affordability assessment as a game changer.
These checks mean all borrowers can expect lenders will not glance over putting them on the path to financial disaster with unaffordable interest and fees or unsuitable arrangements.
North Harbour Budgeting Service financial mentor David Verry says the CCCFA reform so far has meant mobile or payday lenders – like truck shops – have virtually disappeared from the landscape.
“The number of people that we had coming into us before – I had clients that had five or six payday loans – I’m not seeing any payday loans now, or anything close to a payday loan,” he says.
Debtfix director and co-founder Christine Liggins says the reform means less people are being sold a loan which they can’t afford.
“A true and honest affordability assessment will easily stop a debt spiral because it takes into account all costs – all the things that people don’t think about.”
FinCap senior policy advisor Jake Lilley says they will continue to support the changes which are protecting all whānau from facing financial hardship.
“Too often financial mentors see lenders collecting on 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 turn a blind eye to the harm they could cause or have caused,” he says.
“As the Commerce Commission has recently revealed, predatory flex commission practices which are banned overseas, are rife within the car lending industry. It is important that borrowers have safe lending laws backing them up.”
FinCap will continue to engage with the Council of Financial Regulators inquiry into the implementation of the CCCFA reforms to share the benefits of safe lending laws as well as where some lenders are still avoiding responsibility for unfair conduct.
The building financial capability sector has shared their thoughts on what the package of CCCFA reforms so far means for the whānau they support in this video.