The law around lending money to consumers in New Zealand changed on December 1, and customers may find the process takes longer and is more involved.
Changes to the Credit Contracts and Consumer Finance Act 2003 (CCCFA) impose stricter duties on all lenders, including banks, around how they make inquiries and verify information to ensure lending to consumers is likely to be suitable and affordable.
The changes aim to protect New Zealanders from predatory lending by high-cost lenders, but the rules have been applied to all lenders across the industry, including banks.
The rules around checking affordability, in particular, are very strict, and require all lenders to capture and check specific information about a customer’s income and expenses before granting them credit. That includes personal loans, home loans, home loan top-ups, credit cards, overdrafts, and increased credit limits.
Lenders must also keep more extensive records of their suitability and affordability inquiries and lending decisions, and will risk harsh penalties if they haven’t assessed those things appropriately.
The changes mean customers should plan ahead and be patient, as the process will take longer.
Customers will be asked more in-depth questions about their finances and some customers may find it more difficult to get credit than they have in the past.