- Hon Scott Simpson
The Government is delivering on its commitment to make it easier for Kiwis to access the finance they need, when they need it, says Commerce and Consumer Affairs Minister Scott Simpson.
"Access to finance is a critical part of life. Kiwis need finance to buy a house or a car, or to start and grow a business," says Mr Simpson.
"Our Government campaigned on slashing red tape to make it easier and safer for Kiwis to access finance when they need. I am delighted that we are delivering on this promise by progressing three pieces of legislation which will simplify access to financial services.
"Successive reforms heaped compliance requirements on banks, insurers, and lenders. The sector found itself in a bureaucratic straitjacket, regulated by multiple authorities and subjected to duplicative licence requirements.
"This illogical and overly cautious approach led to perverse outcomes for Kiwis who found it more difficult and costly to access basic financial services.
"Many people will remember with frustration banks asking invasive questions about minor expenses like food delivery and subscriptions when they applied for a home loan during the peak of madness a few years ago.
"The Government addressed this by removing overly prescriptive requirements from regulations. These reforms, along with those being progressed, are all about bringing back common sense.
"One of the key changes will mean lenders aren't unfairly penalised for small, harmless mistakes. Lenders will still be required to identify and correct any mistakes.
"Another change, which will apply retrospectively for the period between 2015 and 2019, will enable the courts to apply greater discretion when a lender has failed to disclose certain information to consumers. This fixes a really bad law that meant if a lender forgot to include their address on a loan document - even if everything else was correct and the borrower wasn't affected - they could be forced to cancel all interest and fees until the mistake is fixed. That's like being fined for forgetting to write your return address on an envelope, even though the letter still gets delivered.
"This punitive approach had a potentially chilling effect on competition, as small lenders are not able to absorb the risk and could face closure if faced with significant compensation imposed by the court. Meanwhile big lenders price in the risk and pass the cost on to consumers.
"Other reforms include improvements to dispute resolution services so people can get help when something goes wrong and changes which mean that financial providers will only need to have one conduct licence instead of several. Directors and senior managers will also no longer be held personally liable for mistakes. Instead, the liability will fall on the businesses, which is fairer and more appropriate."
These reforms deliver on a National-ACT coalition agreement to rewrite the Credit Contracts and Consumer Finance Act 2003 to protect vulnerable consumers
without unnecessarily limiting access to credit.
"These reforms will simplify the financial services sector so Kiwis can get on with their lives, get ahead, and grow the economy."
Notes to editors
A fact sheet with further information is attached.
The three Bills that have just been introduced to Parliament are:
- Credit Contracts and Consumer Finance Amendment Bill
- Financial Markets Conduct Amendment Bill
- Financial Service Providers (Registration and Dispute Resolution) Amendment Bill
