Review of December 2021 credit law changes

Background

In January 2022, the Minister of Commerce and Consumer Affairs initiated an investigation into whether the 1 December 2021 changes to the Credit Contracts and Consumer Finance Act (CCCFA) were having unintended impacts. The investigation was led by the Ministry of Business, Innovation and Employment (MBIE), in collaboration with the Council of Financial Regulators.

The terms of reference for the investigation can be found here:

Summary of recent changes

Since the investigation began in January 2022:

• The Government has announced a set of initial changes to the Credit Contracts and Consumer Finance Regulations 2004 (the Regulations) and the Responsible Lending Code (the Code), to address concerns heard early in the investigation, such as unnecessary inquiries by lenders into living expenses on bank statements (March 2022). These changes were in force 7 July 2022.
• The Minister of Commerce and Consumer Affairs has received a final investigation report which identified that the CCCFA changes were having several unintended impacts (April 2022).
• The Government has announced a set of further changes to address the remaining unintended impacts of the CCCFA changes, including clarifying how expenses are estimated and creating a new exception from conducting a full income and expense assessment for refinancing (August 2022). 

On 6 April 2023, the Government announced that the further changes have been finalised. You can read the Minister of Commerce and Consumer Affairs’ press release on the Beehive website:

Government takes further steps in improving safe access to credit(external link) — Beehive.govt.nz

The Credit Contracts and Consumer Finance Amendment Regulations 2023 and version 5 of the Code are in force 4 May 2023:

Credit Contracts and Consumer Finance Amendment Regulations 2023(external link) — New Zealand Legislation

Further information: final investigation report and changes to the law

Final investigation report

The Minister of Commerce and Consumer Affairs received a final report and advice from officials in April 2022. The report identified that the December 2021 changes to the CCCFA were having some unintended impacts.

The unintended impacts included that more borrowers across all lending types, who should pass the affordability test, were being subject to declines or reductions in credit amount. Further, borrowers were being subject to unnecessary or disproportionate inquiries, that they saw as intrusive.

The full report is available here:

A summary of the report findings is available here

Changes made to the Credit Contracts and Consumer Finance Regulations 2004 and Responsible Lending Code

Initial changes in force July 2022

In March 2022, the Minister of Commerce and Consumer Affairs announced that the Government would make initial changes to the Regulations and the Code. The initial changes sought to address some issues identified early in the investigation.

The Credit Contracts and Consumer Finance Amendment Regulations 2022, and version 4 of the Code (above), were in force 7 July 2022:

Credit Contracts and Consumer Finance Amendment Regulations 2022 (SL 2022/177)(external link) — New Zealand Legislation

Version 4 of the Code is in force until 4 May 2023:

Further changes in force May 2023

A second round of Cabinet policy decisions were announced in August 2022 and further changes to the Regulations and Code are in force 4 May 2023.

These further changes

• narrow the range of expenses lenders must consider by more explicitly excluding discretionary expenses
• introduce more flexibility for how buy now pay later expenses are calculated
• expand exceptions from a full income and expense assessment when refinancing existing credit contracts with another lender.

A summary of the initial and further changes to the Regulations and Code is available here

Policy papers and public consultation

Changes in force July 2022

Cabinet policy paper and minute:

Public consultation documents:

• Exposure draft of updated Credit Contracts and Consumer Finance Regulations 2004 and Responsible Lending Code
• Submissions on the exposure draft(external link)

Cabinet legislation paper and minute:

Changes in force May 2023

Cabinet policy paper, minute and Regulatory Impact Statement:

Public consultation documents:

• Exposure draft of Credit Contracts and Consumer Finance Amendment Regulations (No 2) and updated Responsible Lending Code
• Submissions on the exposure draft(external link)

Cabinet legislation paper and minute:

Related information

The affordability and suitability requirements introduced in December 2021 were part of a wider suite of changes to the CCCFA, Regulations and Code following a review by MBIE in 2018. The wider suite of changes introduced

• increased enforcement and tougher penalties
• an interest rate and cost of credit cap on high cost loans
• new responsible lending laws for mobile traders
• additional registration and compliance requirements and responsible advertising standards
• improved transparency and access to redress before debt collection starts.

Further information about the 2018 review and these changes is available here:

Changes to consumer credit law 2020