Credit reforms critical for Kiwi borrowers and lenders
Specialist lenders are urging lawmakers to get New Zealand’s consumer credit reforms right this time, with Parliament now reviewing two major amendment bills that could reshape the sector.
The Financial Services Federation (FSF) – which represents 99 non-bank lenders covering 49% of New Zealand’s personal consumer lending – said the Credit Contracts and Consumer Finance Amendment Bill and Financial Markets Conduct Amendment Bill are critical to restoring balance in credit access and regulation.
“Past reviews and reforms have missed the mark, adding costs and complexity without delivering better outcomes for borrowers,” said FSF executive director Lyn McMorran (pictured).
The message comes as the FSF celebrates its 60th anniversary.
Lending restrictions backfired in 2021, says FSF
FSF said overly restrictive changes made during the last round of reforms in December 2021 had damaging consequences for everyday borrowers.
“Despite clear warnings from the sector that the last round of reforms would create unnecessary barriers to accessing credit, changes ploughed ahead anyway,” McMorran said.
“The result? Lending all but grounded to a halt at the end of 2021, and many everyday New Zealanders found it harder than ever to access the credit they needed for a home, a car, or simply managing through life’s transitions.”
The new bills aim to unwind some of these issues and also transfer oversight of consumer credit from the Commerce Commission to the Financial Markets Authority (FMA).
“This is about putting credit back within reach of everyday Kiwis while keeping consumer protection safeguards in place,” McMorran said.
Regulatory shift must come with enforcement
FSF supports the FMA’s future role as the credit sector regulator but stresses that effective enforcement of responsible lending laws must follow.
“Responsible lenders want to help customers, not lock them out to search for the lender of last resort, and enforcement of responsible lending laws to deal to players who may act outside of these is key,” McMorran said.
The transfer of regulatory responsibilities from the Commerce Commission to FMA is not simply a change in signage, the FMA is resourced and structured to take a more assertive approach to bring irresponsible lenders to account.”
Sector seeks stability after years of reform fatigue
“We’re calling for a period of stability once these reforms are through, so lenders can focus on serving customers and investing in better products – not constantly retooling to keep up with shifting regulatory goalposts,” McMorran said.
“Credit laws might not be the most glamorous headline, but these decisions impact how New Zealanders live, work and get ahead. This time, it’s essential we get the balance between access and protection right.”
What FSF is calling for in its submissions
Support for key consumer protections
FSF backs the retention of interest rate caps, oppressive contract protections, and the definition of high-cost lending, provided they are properly enforced.
Removing personal liability for directors
FSF wants to remove the clause making directors and senior managers personally liable for credit breaches up to $200,000 – calling it a deterrent to sector participation and a driver of conservative lending.
Restoring borrower responsibility clause
FSF is calling for the reinstatement of section 9C(7), which allowed lenders to rely on borrower-supplied information unless they had reasonable grounds to question it.
“The removal of Principle 9C(7) from the Act largely took away any obligation on the part of a borrower to act responsibly with respect to their side of the contractual relationship with the lender.”
Fixing disproportionate disclosure penalties
FSF supports removing section 99(1A), which could force lenders to refund all interest and fees over a minor technical breach – even one without consumer harm.
“The Reserve Bank estimates this has the potential to impact the financial system by almost $13 billion, money that could instead be going to investing in better products for consumers and businesses.”
Streamlining licensing regimes
FSF backs a single licensing regime under the Financial Markets Conduct Amendment Bill, noting that current duplication forces some providers to hold up to six licences for similar activities.
“The proliferation of overlapping licensing regimes... is messy, regulatory overreach,” FSF said.
