FinCap welcomes the government’s continued commitment to safe lending. Laws requiring all lenders to have robust processes to sell only eligible and affordable loans will continue to prevent harm to our communities.
Minister Clark this morning announced
some practical updates focused on lenders by further clarifying what checks they need to do before selling a loan.
The government’s previous reforms to the Credit Contracts and Consumer Finance Act (CCCFA) are already ensuring a level playing field for whānau.
Financial mentors report that the most blatant unfair lending practices are fading as struggling borrowers have more options. This means greater well-being for our whānau and communities.
in one Letter to MPs by FinCap and others earlier this week, we highlighted the introduction in 2021 of clear requirements that lenders, as a game changer, must include in an affordability assessment.
These reviews mean that all borrowers can expect that lenders will not set them down the road to financial disaster with unaffordable interest and fees or unsuitable arrangements.
North Harbor Budgeting Service finance mentor David Verry says that so far, CCCFA reform has resulted in mobile, or payday, lenders — like truck stores — practically disappearing from the landscape.
“The number of people we’ve had before — I’ve had clients who had five or six payday loans — now I don’t see payday loans or anything close to a payday loan,” he says.
Debtfix director and co-founder Christine Liggins says the reform means fewer people will be sold on a loan they can’t afford.
“A real and honest affordability assessment will easily stop a debt spiral because it takes into account all the costs – all the things that people don’t think about.”
Jake Lilley, FinCap’s senior policy advisor, says they will continue to support the changes, which protect all Whānau from financial hardship.
“Too often, finance mentors see lenders collecting loans that would never work, and immediately set a whānau on a difficult journey where kai was difficult to buy.
“Safe lending laws with financial checks to assess affordability mean lenders can’t turn a blind eye to the harm they’re causing or may have caused,” he says.
“As the Commerce Commission recently revealed, predatory flex commission practices that are banned abroad are rampant in the auto lending industry. It’s important that borrowers have safe lending laws to support them.”
FinCap will continue to participate in the Council of Financial Regulators’ investigation into the implementation of the CCCFA reforms to share the benefits of safe lending laws, as well as where some lenders still avoid responsibility for improper conduct.
- FinCap is the umbrella organization for over 900 financial mentors in Aotearoa
- The package of reforms under the CCCFA in recent years includes interest rate caps on expensive loans, certification for mobile lenders (or truck shops), and penalties for officers and directors who do not comply with changes
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