The Government plans to tighten up consumer lending regulation potentially by capping interest rates and fees, increasing licensing or registration for lenders, strengthening enforcement and penalties for irresponsible lending and introducing more prescriptive requirements for affordability assessments and advertising.
Commerce and Consumer Affairs Minister Kris Faafoi has released a discussion paper detailing government findings from a review of the Credit Contracts and Consumer Finance Act (CCCFA). Faafoi says findings show 2015 amendments to the CCCFA, under the previous National Party-led government, didn’t go far enough.
“Possible measures identified in the paper to protect consumers include caps on interest rates and fees, increased licensing or registration for lenders, strengthening enforcement and penalties for irresponsible lending and introducing more prescriptive requirements for affordability assessments and advertising,” says Faafoi.
“Continued predatory behaviour by mobile traders is also considered, as is extension of the Act to cover credit not currently covered including after pay options.”
“I’ve spoken with people who have been given loans that are clearly unaffordable for them, and others who have been lashed with huge penalties and fees. These practices trap people and whanau in an appalling debt spiral that is very difficult to get out of,” says Faafoi.
“We need to ensure the regulatory settings are right to stop the practices that get people into these terrible situations.”
Getting the credit settings right, so people can borrow appropriately when they need to but aren’t dragged into a long-term debt spiral is a way to help ensure all New Zealanders benefit from a strong and inclusive economy, Faafoi says.
Submissions on the discussion paper close on August 1.