Loans easier to get after ‘confusing and stressful’ affordability regulations scrapped

Wednesday, 31 July 2024

A mother of four who was loaned more than $22,000 from a finance company had to skip meals to repay the debt.

New Zealanders will have easier access to finance as affordability assessment requirements are dropped from law.

While some are celebrating the easier access to finance, others warn what it may do to the vulnerable who are already being preyed on.

Loans will be easier to get as of Wednesday, with affordability regulations scrapped from the Credit Contracts and Consumer Finance Act (CCCFA).

The regulations used to require people applying for loans to have to submit large amounts of personal information and disclosures before it could be approved.

The government says removing the affordability regulations means there won’t be an unnecessary limit to credit access.

ANZ Personal Banking Managing Director Grant Knuckey said customers would find the process of applying for money, whether it’s a home loan or a credit card, easier.

“For those looking to use a loan to buy their first home, for example, the new rules should lead to a smoother application process.”

Commerce and Consumer Affairs Minister Andrew Bayly said the process was inefficient and frustrating, prior to the changes.

“We may still need to review transaction information to help ensure we accurately determine the affordability of the lending.”

Commerce and Consumer Affairs Minister Andrew Bayly said the move will enable Kiwis to access finance with greater ease.

“The hoops customers had to jump through resulted in a confusing and stressful process.”

Not all are on board with the process, with independent financial mentor Kathryn Burton previously telling Stuff that cases of vulnerable people being taken advantage of by lenders would only get worse under the new rules.

“The major concern is that there will no longer be clarity around what a robust affordability assessment looks like. We will have different lenders applying vastly different processes to the way they approach affordability assessments,” Burton said.

Independent financial mentor and community advocate Kathryn Burton.

The current system allowed budgeters to take cases through a dispute resolution scheme if an affordability assessments was not done properly. If the dispute was ruled in the borrower’s favour loans could be reduced by thousands of dollars.

Without it as a safeguard, Burton feared there would be “fewer mechanisms” to punish predatory lending, which was “out of control” since the Covid-19 pandemic.

“More and more people are feeling as though they have to borrow to pay for the basics. We have food being bought on buy now, pay later debt, we also have groceries and electricity bills being put on credit cards,” she said.

A mother of four who was loaned more than $22,000 from a finance company also warned others against falling victim to predatory lenders.

The 29-year-old, who Stuff agreed not to name, applied for the loan in 2020 to pay off debt for two vehicles, as well as apply for a residency visa for her family, who had just moved to New Zealand.

However, when the bills came the mother, who was pregnant at the time, said she struggled to make the repayments, and was forced to go without food in order to service the debt.