Three financial reform bills to rebalance the system undergo first readings

• bring common sense back into New Zealand’s financial services regulations 
• tackle certain counterproductive aspects of the current legislation, the Credit Contracts and Consumer Finance Act 2003 (CCCFA) 
• safeguard consumers while ensuring access to credit and innovation 
• help Kiwis be confident that they can receive fair and effective support when they need it 

“For many Kiwis, the absurdity of past rules became clear when banks were forced to quiz them about what they’d been spending on takeaways or Netflix subscriptions before approving a mortgage,” Simpson said in the news release. “That wasn’t responsible lending, it was regulatory overreach.” 

Simpson added that the contemplated changes aim to hold financial institutions accountable while removing unnecessary red tape, make it easier for New Zealanders to access the financial services they require, and help the country’s economy grow. 

Proposed reforms

In its news release, the government shared that the planned changes seek to: 

• enable regulators to act proactively by equipping the Financial Markets Authority with the tools to oversee lending, banking, and insurance markets for the consumers’ benefit 
• shift unnecessary personal liability for compliance failures from senior managers and directors to businesses 
• streamline requirements and decrease duplication and compliance costs by no longer requiring financial service providers to obtain overlapping conduct licences 
• strengthen dispute resolution services by improving the oversight and independent governance of financial dispute resolution schemes 
• adopt a fair and proportionate non-disclosure approach by giving courts more discretion in cases of lenders’ failures to disclose certain information to consumers 

The government added that the last amendment would be retrospectively applicable to the period from 2015–19. 

“Financial regulation should protect people, not block their ambitions,” Simpson said in the government’s news release. “This progress means we’re one step closer to a more dynamic, fair, and accessible financial system for all.” 

Reaction from banks

The banking industry welcomed the Credit Contracts and Consumer Finance Amendment Bill’s first reading, according to a media release from the New Zealand Banking Association (NZBA). 

“We believe the change proposed in the amendment bill is fair as it simply tidies up the existing legislation to ensure that all breaches from 2015 to 2019 are treated the same as those currently,” said Roger Beaumont, NZBA chief executive, in the media release. 

Beaumont explained that the contemplated changes confirmed the courts’ ability to decide what would amount to a “just and equitable” outcome for a lender’s failure to meet disclosure obligations. 

Beaumont noted that the proposed amendments would continue to protect consumers, hold lenders appropriately accountable, and enable consumers and regulators to commence CCCFA claims before the courts. 

“That is no different to other civil and criminal cases and does not stop any current or potential future cases brought under this Act,” Beaumont said in the NZBA’s media release. 

Beaumont shared that the banking industry has openly and transparently sought changes to disclosure provisions for nearly a decade, given that the potential consequences failed to align with the possible harm. 

“Currently any minor breach in a disclosure document, such as a wrong address, for the years 2015 to 2019 may require a full refund of interest and fees,” Beaumont said in the media release. “That is not fair or proportionate compensation for customers who may not have suffered any material impact to their finances.” 

Beaumont added that all 17 members of the NZBA have backed the proposed changes.